In the Early 2000s, Borrowers No Longer Needed to Provide

question 15

True/False

In the early 2000s, borrowers no longer needed to provide proof of employment or income. These were popularly called "no doc" or "liar loans" because banks weren't bothering to verify the "truth" of what borrowers were claiming on their mortgage applications. This was one of the factors that laid the groundwork for the disaster in the United States.

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Definitions:

Fair-Value Method

An accounting approach where assets and liabilities are recorded at their current market values rather than their original cost.

Goodwill

An intangible asset arising when a company acquires another for a price higher than the fair market value of its net assets.

Other Comprehensive Income

Income that includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Equity Method

A financial recording method where investments are logged if the investor has a considerable impact on the investee, though not complete control.