Community spokesperson: After a recent surge of

Question

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.
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.
C) Most residents have lived in the area for over 20 years and do not want to leave their homes.
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.
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.

Please help with the solution

DexDee · Answer

If E is true, then the plan will not work. I pick E.

OA?

Sudhanshuacharya · Answer

I will post the OA after few more discussions. But the OA is not E.

g106 · Answer

Initially I thought E.

If E is not the OA then it could be D

Sudhanshuacharya · Answer

Folks please try to explain your answers (like reason for selection and rejection of certain option) as this is a discussion forum. 
BTW the OA is D

Phoenix72 · Answer

IMO-D.
As per the plan the buyers would be given special mortgages with a low interest rate for the first two years.Hence the scheme could fail if the buyers are unable to pay after interest rates are increased after 2 yrs.

crick20002002 · Answer

+1 for D.

The only other contender was C, but most does not mean all. Hence D wins.

Crick

JeeMat · Answer

I don't think it's D. The plan is to attract potential buyers. Who cares if they can't pay anymore after 2 years? The question doesnt ask or state anything about long-term effects. They'd be able to sell those houses today and thats all that matters for the question.

For the lack of other reasonable choices I'd choose E. I don't really like it because in my opinion, they could still sell the houses and it'd just take a little longer if the brokers are busy, but again i think that's the most reasonable one.

patrickwestoo · Answer

I totalt agree! The main question is are we looking for a long term benefit or a short one? I believe a short one is asked for. E is a really bad choice but it's better since it gives explanations to the specific question? Anybody know how to distinguise between reason and specific wording in the question?

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StrangeWind · Answer

According to the question "Which of the following, if true, represents  the most significant potential problem with the plan to attract buyers through special mortgage offers ?". E is better choice than D

windofchange · Answer

The scope of this CR question is  the potential problem of the special mortgage offer . During my first read, I can eliminate choices A, B, and C.

Only D and E left, and I took D. I think not having enough personnel may not be the  potential problem  of the plan. Choice D, on the other hand, can result in raising the default rate when the number of buyers who won't be able to repay increases. So, that can be considered the potential issue of the plan.

patrickwestoo · Answer

The problem is the wording of the question! There is no potential problem with attracting the buyers with low interests rates, they will be attracted! The problems come later but are not associated with selling houses!

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manalq8 · Answer

I go for D because:

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.
foolish is not a word we can rely on because it might not foolish as it has positive effect since it would increase the purchases.
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.
we can't trust percents in CR, we dont know how big the number is with 1% or how low. it is not representative.
C) Most residents have lived in the area for over 20 years and do not want to leave their homes.
this is irrelevant and there is an assurance word that we can't trust "DO NOT WANT".
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.
this answer serves best as it indicates a direct problem with the plan or conclusion that people would not be able to make payments.
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.
totally irrelevant and out of scope

hope that helps

good luck

Rock750 · Answer

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.
B- rime 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.
C- Most residents have lived in the area for over 20 years and do not want to leave their homes.
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.
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.

OA :  D

The plan to attract potential buyers by offering low-interest rate mortgages for the first two years rests on which of the following assumptions?

A- Vacant homes will always fall into disrepair.
B- Homes in the area remain vacant mostly because it is too difficult for potential buyers to get mortgages.
C- Lenders have enough confidence in their knowledge of interest rates that they can predict what will be considered  a low rate  for the next two years.
D- Some home owners may stay in the community, but their property values will decrease.
E- Vacant homes will cause residents to panic.

OA:  B

Bluelagoon · Answer

The problem is people are leaving. If you try to attract people by lowering rates for two years than you might get people who can't pay the mortage after the rates go high and hence have to leave. purpose defeated. D Wins.

mshrek · Answer

I want to discuss on the second question, for which B is the answer. I understand that "B" sounds an immediate assumption but I am unable to completely reject option "C". I still do feel that C is somewhat an assumption and hence can be correct. Please tell me where am I falling for the trap :shock:

sshrivats · Answer

@mshrek : for the second question, option C may be an assumption, but that is absolutely irrelevant to the context of the question. Whether lenders know what is low or not is not important in this context.. the interest rate may be zero and there may still not be any buyers..

the important assumption is.. lower interest will attract potential buyers. i.e potential buyers have stayed away because interest rates are high.

B is right.

the important assumption is.. lower interest will attract potential buyers. i.e potential buyers have stayed away because interest rates are high.

B is right.

vinraj · Answer

The Answers to this question does not seem to be framed right. THough the answer is given as B, there is good reason to reject B.

B says "Homes in the area remain vacant mostly because it is too difficult for potential buyers to get mortgages."

The passage mentions only about giving special Mortgages (interest free mortgages) . So it is reasonable to think that vacant houses are due to lack of these 'low interest mortgages".  But we Cannot say that people find it very difficult to even find ordinary mortage facility.  The passage has no indication of normal mortgage facilities. May be there are many mortgages available, but only low interest mortgages are unavailable.. So B is not a good answer.

B wud have been correct if it said "Homes in the area remain vacant mostly because it is too difficult for potential buyers to get  low interest  mortgages."

On the other Hand consider C:
If people dont know what is low rate, then why wud people buy the houses offered on low interest mortgage.
If you Offer low interest rates to the people who dont know what is meant by 'low rate' , it absolutely does not make sense. If people dont know what is 'low rate', them why will people be attracted to that idea.?

Option C is much better an answer for this passage.

Dalint · Answer

Am I the only one who chose answer B? If people are afraid of crime rates and will not buy homes for that reason then it doesn't matter whether mortgages are with low interest rates or not. People won't buy them in any case, so the plan won't work.

sallysea · Answer

Merged topics. Please, search before posting questions!

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