Why do mortgage companies begin to require larger down payments from their borrowers when housing prices begin to fall?
What will be an ideal response?
The primary risk that a mortgage company makes when it loans money on a house is default on the part of the borrower. Even though the house is typically the largest part of the collateral of the loan the mortgage company could stand to lose a significant amount of money if it had to sell the repossessed home in a declining market. Making borrowers put up a larger down payment helps make up for the deficiency in the value of the collateral.
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A few decades ago, there were hardly any Subway restaurants in India. Now, they are present in almost every big city. This is an outcome of:
A) fair trade union practices. B) traditionalism. C) the protectionist policies adopted by the Indian government. D) globalization.
If individual X has comparative advantage in painting and individual Y has comparative advantage in carpentry, then
A) individual X must use fewer hours to paint a fence than individual Y. B) individual Y will specialize in painting. C) there is a lower opportunity cost (expressed in units of carpentry) for individual X to paint than for individual Y to paint. D) specialization will not occur, since each does not have a clear absolute advantage.