A Foreclosure Happens When

question 91

Multiple Choice

A foreclosure happens when:

• A) the rates of interest prevalent in the housing market are extremely volatile, forcing the lender to demand additional collateral from the borrower.
• B) the lenders attempt to recover loan balances from borrowers who have quit making payments by forcing the sale of the home pledged as collateral.
• C) the borrowers repay their housing loan well before the estimated closing period of the loan.
• D) the value of a house is higher than the loan taken on the property.
• E) the borrower is planning to restructure the loan taken for making mortgage payments.

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Definitions:

Market Failure

Situation in which an unregulated competitive market is inefficient because prices fail to provide proper signals to consumers and producers.

Incomplete Information

A situation in economics where all parties in a transaction do not have full and equal knowledge.

Externalities

Economic side effects or by-products that affect an uninvolved third party; can be positive or negative, such as pollution or public parks.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning they are accessible to all members of society and one person's consumption does not reduce availability to others.