Question

When adjustable mortgage rates began to increase What was the result?

Answer 1

Answer:

The correct answers are:

• B) Thousands of homes were foreclosed on
• D) Banks tightened credit restrictions again

Explanation:

B) Adjustable Mortgage Rate (ARM) changes every certain period of time. When this period ends,  ARM resets to whatever the prevailing interest rate is. Many borrowers who did not anticipate this, had to pay more for their monthly mortgage. As a result, banks foreclosed homes of those borrowers, who could not pay their monthly mortgage.

D) To prevent (or alleviate) the real estate crash, banks tightened their criteria for potential borrowers selection. Borrowers who most likely would not be able to sustainable make their payments, were left out.