If mortgage brokers do not make a strong effort to evaluate whether the borrower can pay off a loan,this creates a
A)severe adverse selection problem.
B)decline in mortgage applications.
C)call to deregulate the industry.
D)decrease in the demand for houses.

Question

Quizplus · Accepted Answer

If mortgage brokers do not evaluate whether the borrower can pay off a loan, they are more likely to attract borrowers who are high risk and may default on their loans. This creates a severe adverse selection problem as the pool of borrowers becomes riskier, potentially leading to higher rates of default and economic instability.

If Mortgage Brokers Do Not Make a Strong Effort to Evaluate