The Driving Force Behind the Securitization of Mortgages and Automobile

question 65

Multiple Choice

The driving force behind the securitization of mortgages and automobile loans has been

• A) the rising regulatory constraints on substitute financial instruments.
• B) the desire of mortgage and auto lenders to exit this field of lending.
• C) the improvement in computer technology.
• D) the relaxation of regulatory restrictions on credit card operations.

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Definitions:

Security Interest

A legal claim or lien on collateral that gives a lender the right to repossession if the borrower defaults on the agreement.

Legal Enforceability

The characteristic of a contract or agreement that allows it to be upheld or compelled by law.

Perfection

The state of being free from all flaws or defects, or achieving the highest degree of excellence.

Balloon-Payment Mortgage

A mortgage that has relatively low fixed payments during the life of the mortgage followed by one large final (balloon) payment.