Deregulation of the Mortgage Industry in 1999 Helped Produce the Housing

question 61

Multiple Choice

Deregulation of the mortgage industry in 1999 helped produce the housing crisis of 2007 and 2008 by

• A)driving housing prices down by preventing too many qualified people from obtaining the mortgages needed to purchase homes.
• B)allowing many new mortgage companies to form, offering "predatory" loans that people could not afford to repay.
• C)making foreclosures almost impossible under the law and allowing many people to stop paying their mortgages with no monetary penalties.
• D)eliminating most mortgage companies and forcing potential homeowners to pay cash for their homes.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account that represents the amount of accounts receivable a company does not expect to collect.

Accounts Receivable

The money owed to a business by its customers for goods or services that have been delivered or sold but not yet paid for.

Allowance Method

An accounting technique used to account for bad debts, estimating uncollectible accounts as an expense to the income statement and reducing accounts receivable on the balance sheet.

Allowance Method

An accounting technique used to estimate and account for bad debts by establishing an allowance for doubtful accounts.