Explanation:
Teaser rates are defined as the very low initial interest rates offered on an adjustable-rate mortgage (ARM) or other loan products to attract borrowers. After the introductory period, which may last for the first few years, the rate adjusts and often increases significantly, subjecting the borrower to much higher monthly payments. This practice was heavily associated with the relaxed lending standards leading up to the 2007 Credit Crisis.
Ultimate access to all questions.
Q.150 One of the factors associated with the Credit Crisis of 2007 is the relaxed lending standards of lenders. Lenders began to attract new entrants in the housing market by offering adjustable-rate mortgages (ARMs) and teaser rates. Teaser rates are defined as:
A
The mortgage rates that are mentioned on the mortgage's promotional material.
B
The very low rates that are offered for the first few years before the rates increased significantly in later years.
C
The fixed mortgage rate that is calculated as LIBOR plus specific basis points.
D
The fixed rate at which a defaulting borrower can restructure the mortgage.
No comments yet.