Question

Subprime mortgages were considered toxic assets because mortgages were bought by investment banks and they bundled them and sold them as securities *
true
false

Answer 1

Subprime mortgages were considered toxic assets because mortgages were bought by investment banks and they bundled them and sold them as securities is True.  

Explanation:

Toxic assets are those which can be sold a very low price therefore not making any profit for the seller due to significant drop of value or because they aren’t in demand anymore and cannot be sold in the market. Subprime mortgages were one of the risky investments in the midst of the financial recession.

Subprime mortgages from lenders were loaned to borrowers with no assets, poor credit and sometimes not even an income and sold to investors with regular payments as security. This over securitization was one of the major cause that triggered the financial crisis in 2007-2009 and a decrease in housing demand.