Answer: Many first-time home buyers paid zero down payment in 2005.

## Explanation **Option C is correct** because zero down payment mortgages significantly increased the risk of delinquency. When homebuyers have no equity in their homes, they have less incentive to continue making mortgage payments when housing prices decline or when they face financial difficulties. This creates a higher probability of default. **Why other options are incorrect:** - **Option A**: Over-collateralization would actually reduce risk, not increase delinquencies. More collateral provides better protection for lenders. - **Option B**: Decreasing interest rates would make mortgages more affordable, which should decrease delinquencies, not increase them. - **Option D**: Rising housing prices typically reduce delinquencies because homeowners have equity and can sell if needed. The subprime crisis was triggered by falling housing prices, not rising ones. **Historical Context:** During the subprime mortgage crisis, many borrowers with poor credit histories were given mortgages with little or no down payment. When housing prices began to decline in 2006-2007, these borrowers found themselves with negative equity (owing more than their homes were worth), leading to widespread defaults and foreclosures.

Author: LeetQuiz .