Community spokesperson: After a recent surge of foreclosures, many homes in our community are vacant and falling into disrepair. Property values are already falling, and, if action is not taken quickly, will fall even further when panicked residents begin to leave. Clearly the only way to prevent a snowball effect is to make it easy to purchase these vacant homes by offering potential buyers special mortgages with a low interest rate for the first two years.
Which of the following, if true, represents the most significant potential problem with the plan to attract buyers through special mortgage offers? A) Interest rates in the area are already at a 5-year low, and it would be foolish of lenders to lower them even more.Even if the interest rates are low, they can be further lowered to arrest snowball effect, even if that means a loss of lenders.
Question stems asks us to locate
a potential problem to the plan. It doesn't matter whether plan will be profitable or not.
B) Crime rates in the area have risen by 1% in the last year, making it less likely that potential buyers will be interested in moving to the area.Pay close attention to words -
less likely.
Potential buyers are "less likely" to buy properties in the area; they may still buy some.
Even if only few houses are sold, snowball effect can be resisted.
Another prompt, as applicable in many CR questions, is that - "less likely" ≠ not buying!
A probability of an event is not equal to the happening of the event. Similarly, a less probability of event is not equal to non-occurance of event.
C) Most residents have lived in the area for over 20 years and do not want to leave their homes.This is not a problem; in fact, it will only contribute to the effectiveness of the plan.
D) Low interests rates will likely attract buyers who will be unable to make payments when the interest rate goes up after the first two years.New buyers will be able to buy the property, helping to hamper the snowball effect.
But option prompt says -
they'll be unable to make payments later.
Since it's option prompt, we've to assume it true.
So, the arrest [of snowball effect] will be temporary; the effect will start again after two years and the issue will remain unresolved.
E) There are few mortgage brokers in the area, making it unlikely that there will be enough personnel to assist a rush of potential home buyers.As in option [B], Even if only few houses are sold, snowball effect can be resisted. So, this contributes to resolution of problem.
Hope it helps.
Cheers