<u>Question 1</u>
The foreclosure is the process through which a lender tries to recover the amount of a loan from a borrower who cannot afford to meet the repayment schedule and, is forced to sell the asset used as the collateral for the loan. In the case of a mortgage loan, such asset was the house or any other underlying property.
As the value of the houses in the market had significantly dropped due to the reduction in demand, with the sale of the house the borrowers could not give back the whole amount of the loan and, even after selling the collateral, they were still indebted for some quantity.
<u>Question 2</u>
Farmers were victims of the <u>overproduction crisis</u> (reason 1), which was intesified due to the simultaneous <u>decrease of the demand figures</u> (reason 2<u>)</u>.
The arrival of mechanization, enhanced both productivity and production in farms. The initial effects were very positive, as it allowed farmers to reduce costs and increased profits. As more production was sold, more people was hired and more money was invested on equipment to keep the growing output levels. It constituted a cycle: more people, more equipment, more production (once and again).
At some point there were large production surpluses and, simultaneously, demand plunged. There were big amounts of unsold items, farmer's profits significantly decreased, they had to fire employees, to liquidate investments, etc. In turn, the dismissed employees lost their wages and started to demand a lower amount of consumption goods and overall demand levels decreased even more, worsening the situation of farmers. It became a downward spiral that brought bankruptcy to many farmers.
