Subprime Lending and NINJA Loans Quiz

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What is the defining characteristic of NINJA loans?

No need for proof of income or assets (correct)

Verification of income and assets

Low interest rates for the first year

High profitability for lenders

What unethical behavior did banks engage in with NINJA loans?

Strict adherence to all regulations

Making no effort to verify the ability to pay (correct)

Excessive verification of applicant details

Raising interest rates abruptly

How did subprime lending differ from traditional mortgage lending?

Higher risk for lenders (correct)

Lower risk for lenders

Higher interest rates for borrowers

Lower profitability for lenders

What impact did the rise in interest rates have on borrowers with teaser rate mortgages?

Higher monthly payments Signup and view all the answers

What were the consequences faced by borrowers when property prices stagnated in 2006?

Difficulty in repaying the loan Signup and view all the answers

In what way did the film The Big Short illustrate the financial crisis?

The Big Short revealed people who predicted the crisis Signup and view all the answers

What unethical behavior was exhibited by brokers and lenders in the context of selling mortgages?

Selling mortgages to customers who were likely to default Signup and view all the answers

What strategy did big lenders like Countrywide employ by offering loans for 80% of the mortgage along with second loans for the remaining 20%?

NINJA loans Signup and view all the answers

What is one of the causes of the global financial crisis as mentioned in the text?

Growth of the financial sector disproportionate to other industries Signup and view all the answers

What shift in focus is noted about bankers in relation to the financial sector?

Concentrating on writing algorithms for faster trades Signup and view all the answers

What did the financial sector increasingly create instead of focusing on personal and business finance needs?

Secondary and derivative markets for trading financial instruments Signup and view all the answers

Which term is associated with providing loans to individuals who have No Income, No Job, and No Assets?

NINJA loans Signup and view all the answers

What percentage of mortgages sold were accounted for by mortgage brokers, according to the text?

60% Signup and view all the answers

In what percentage of cases investigated, customers had self-certified their income?

50% Signup and view all the answers

Which major mortgage lender approached the government for support in September 2007?

Northern Rock Signup and view all the answers

What type of obligations were used to slice loans into tranches when packaging mortgages into securities?

Collateralised debt obligations Signup and view all the answers

Which bank required a £45 billion bailout from the UK government in September 2008?

RBS Signup and view all the answers

What year did Lehman Brothers fail when it could not sell its vast tranches of mortgage-backed securities?

2008 Signup and view all the answers