Recall the Application about the number of homeowners in the year 2012 who owed more on their homes than their homes were worth to answer the following question(s). To assist homeowners who are behind on their payments and may eventually lose their homes to foreclosure, many in Congress have advocated for reduction on the amount of money they actually owe-or principal reduction. The hope is that with a reduction in the amount they owed they would start making timely payments on their mortgages and avoid a messy default.
-According to this Application, for approximately 12 million homeowners in 2012, the amount owed on mortgages was higher than the actual value of the homes. These homeowners used borrowed funds to purchase their homes, a practice known as
A) securitization.
B) leverage.
C) liquidity.
D) acceleration.

Question

Quizplus · Accepted Answer

Leverage refers to the use of borrowed funds to purchase an asset, such as a home. In this case, the homeowners have borrowed funds to purchase homes, but the amount they owe on their mortgages is now higher than the actual value of their homes. This is a common situation for many homeowners who purchase homes with a mortgage.

Recall the Application About the Number of Homeowners in the Year