Question

By the height of the housing bubble in 2005 and early 2006, lenders had greatly loosened the standards for obtaining a mortgage loan, with many mortgages being granted to ________ borrowers with flawed credit histories and ________ borrowers who did not document their incomes.A sub-prime; "Alt-A"B "fresh-start"; prime rateC "credit crunch"; black marketD adjustable rate; shadow-banking

Answer 1

Answer: A sub-prime; "Alt-A"

Explanation:

Sub-prime borrowers are those who take loans and qualify as the worst payers, with all kinds of bad records or other requisites missing. A flawed credit history can cause that person to have access to sub-prime loans. Sub-prime loans hare the riskiest and therefore their rate is higher.

AS for Alt-A, it stands for "Alternative A paper", whereas A-Paper is the proper mortgage loan to ask for. It says alternative, as it is riskier than the regular mortgage, and therefore has an alternative interest rate, but not riskier than the sub-prime. People with incomplete documentation (as for example not having the incomes in documents) are typical examples of Alt-A mortgages.