1. Until roughly 2006, default rates on mortgages were fairly low due to ever increasing home prices. According to the videos, how did rising home prices make a cycle which then caused home prices to increase even more? Explain.

2. If more people begin defaulting on their mortgage payments, what should happen to the market value of Mortgages, MBS, and CDS? Give a short explanation for the change in value of each.

3. Suggest some policy options you think would be useful in averting similar crises in the future and explain why.

4. Who does your group feel was the MOST responsible for the mortgage crisis and why?

Answer rating: 100% (QA)

1 Rising home prices created a cycle where lenders became more willing to extend mortgages to riskie... View the full answer