Check (X) which of the following factors CONTRIBUTED to the…
Check (X) which of the following factors CONTRIBUTED to the excessive run up in housing prices from 2002-2006, which helped create a real estate bubble and the subsequent 2008 Financial Crisis, check (O) if the factor did not: Creative, high risk subprime mortgage financing programs Increase in traditional mortgage financing programs Financial “engineering/innovation” of subprime CDO’s (Collateralized Debt Obligations) Speculative investors “flipping” homes Predatory lending practices taking advantage of ill-informed borrowers Greed, dishonesty, conflicts of interest Government mandated affordabl housing program High interest rates Strict underwriting standards Unregulated/unsupervised CDS’s (Credit Default Swaps) A “originate to distribute” fee driven based incentive payment system Informed consumers knowingly using high risk, creative financial programs to buy homes Wall Street Banks reliance on mathematical modeling for predicting the default rate for subprime loans Strict, timely regulatory supervision and enforcement actions Increase in loans to high-risk first time and hard to verify cash flow buyers Lack of due diligence by investors purchasing subprime CDO’s from investment banks FED keeping rates low too long contributing to an asset-driven credit bubble