1. Data Hunt: During 2012 some experts were predicting that 10 million homes or

Question

1.

Data Hunt:

During 2012 some experts were predicting that 10 million homes or more would enter foreclosure. Question: Is there a way to predict changes in the foreclosure rate? Answer: Yes. Well, the answer is yes in the short-term only (about 6-12 months in the future). The indicator that can predict foreclosure rates is the delinquency rate. Based on a sample of approximately 41.6 million mortgage loans this indicator provides quarterly delinquency and foreclosure statistics at the national, regional and state levels. The reason why this indicator can predict foreclosures is that all mortgages first go delinquent before foreclosure.

Assess the latest delinquency statistics using this link.

https://fred.stlouisfed.org/series/DRSFRMACBS

How high did the delinquency rate get after the Great Recession? Enter that rate below. For example: If the max delinquency rate was 16.74% then enter 16.74

Answer:

2. Many thought the main source of foreclosures during the Great Recession would be millions of adjustable rate mortgages (ARMs). The belief was that many holders of subprime ARMs would find themselves unable to meet their monthly payments once mortgages rates reset after the low teaser-rate period. This did not happen to the extent the experts predicted. What is the main reason for this inaccurate prediction?

Select one:

a. Massive government aid to holders of ARMs

b. An uptick in the economy

c. Banks reduced the principle of ARMs

d. Fed's aggressive lowering of interest rates

Explanation / Answer

1. The great recession which lasted from December 2007 to June 2009, the corresponding rate of delinquency have increased. The highest or the maximum delinquency rate was 11.53% in January 2010. or 11.53

2. the main reason why the great recession did not prolong the crisis to the extent predicted was that of the government aid to the holder of the ARMs where the government guaranteed the mortgage debt. (A)

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