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For years, Pleasanton was a commuter community to industries in Middle

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For years, Pleasanton was a commuter community to industries in Middle [#permalink]

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New post 16 Jun 2016, 04:50
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  75% (hard)

Question Stats:

61% (02:06) correct 39% (02:15) wrong based on 267 sessions

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For years, Pleasanton was a commuter community to industries in Middleburg. The close of several factories in Middleburg has set in motion a wave of mortgage defaults: citizens of Pleasanton are foreclosing on their houses in significant numbers. Many of the mortgages were held by local banks, and these adversely affected banks have been under pressure from their boards to offset the banks' losses. One principal means to recoup these losses is for the banks to raise interest rates, including mortgage rates. If those owning property Pleasanton continue to default on their mortgages, then the mortgage rates offered by these banks will continue to rise.

Which of the following, if true, best supports the conclusion that mortgage rates in Pleasanton will continue to increase?

a. Mortgage rates in Middleburg have been steadily increasing over the past year and analysts expect them to continue increasing for some time.

b. Many prospective homebuyers in the Pleasanton area, deterred by increased mortgage rates, have decided to purchase homes in other areas.

c. Many current homeowners in Pleasanton, in reaction to increased interest rates, have put their homes on the market and are looking for homes in other areas.

d. Many local businesses in Pleasanton, who were dependent on local residents employed in Middleburg, have been unable to pay the mortgage on the business properties they own.

e. There are so few houses in Pleasanton that the banks cannot realize an economy of scale, making mortgage rates unrealistic for most potential homeowners.

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Re: For years, Pleasanton was a commuter community to industries in Middle [#permalink]

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New post 16 Jun 2016, 05:04
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For years, Pleasanton was a commuter community to industries in Middleburg. The close of several factories in Middleburg has set in motion a wave of mortgage defaults: citizens of Pleasanton are foreclosing on their houses in significant numbers. Many of the mortgages were held by local banks, and these adversely affected banks have been under pressure from their boards to offset the banks' losses. One principal means to recoup these losses is for the banks to raise interest rates, including mortgage rates. If those owning property Pleasanton continue to default on their mortgages, then the mortgage rates offered by these banks will continue to rise.

Which of the following, if true, best supports the conclusion that mortgage rates in Pleasanton will continue to increase?

a. Mortgage rates in Middleburg have been steadily increasing over the past year and analysts expect them to continue increasing for some time. ( some time ---> doesn't tell that mR will continue to rise .....sometime can even mean a very short span of time )

b. Many prospective homebuyers in the Pleasanton area, deterred by increased mortgage rates, have decided to purchase homes in other areas. ( this is talking about New home buyers , what about the home owners who are not naking the M payments ) irrelevant

c. Many current homeowners in Pleasanton, in reaction to increased interest rates, have put their homes on the market and are looking for homes in other areas.( if home owners are about to sell the houses then with the sold amount they will make the payments .... thus indirectly weakens)

d. Many local businesses in Pleasanton, who were dependent on local residents employed in Middleburg, have been unable to pay the mortgage on the business properties they own. ( if many don't pay the mortgages , MR will continue to rise ) strengthens also very close the the information provided . (perfect answer)

e. There are so few houses in Pleasanton that the banks cannot realize an economy of scale, making mortgage rates unrealistic for most potential homeowners. ( economy of scale , what a bull shit .....out of scope)
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Re: For years, Pleasanton was a commuter community to industries in Middle [#permalink]

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New post 16 Jun 2016, 05:06
Yes spot on...Actually I misread the question stem...
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Re: For years, Pleasanton was a commuter community to industries in Middle [#permalink]

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New post 11 Jan 2018, 21:48
OE for why B is wrong.

Certainly if prospective home-buyers are turned away, this doesn't help the situation, but it is not clear that this alone would cause a new wave of foreclosures. It wouldn't solve the problem, but wouldn't necessarily compound the situation. Choice (B) is incorrect.
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Re: For years, Pleasanton was a commuter community to industries in Middle [#permalink]

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New post 01 Apr 2018, 03:39
Premise : wave of mortgage defaults >>> foreclosing on their houses >>> banks have been under pressure >>> banks to raise interest rates
Conclusion : the mortgage rates offered by these banks will continue to rise.
Question : any info which support the conclusion?

a. Mortgage rates in Middleburg have been steadily increasing over the past year and analysts expect them to continue increasing for some time.----Somehow it it mentioned in the above stem.

b. Many prospective homebuyers in the Pleasanton area, deterred by increased mortgage rates, have decided to purchase homes in other areas. --- out of scope, as they are moving to other areas.

c. Many current homeowners in Pleasanton, in reaction to increased interest rates, have put their homes on the market and are looking for homes in other areas. ---- it is not helpful for the explanation of above conclusion for sure.

d. Many local businesses in Pleasanton, who were dependent on local residents employed in Middleburg, have been unable to pay the mortgage on the business properties they own. ---- So many Local businesses in P are also not able to pay mortgage. Meaning one more contender for banks to look out for. banks will be very unhappy for this and increase the mortgage.

e. There are so few houses in Pleasanton that the banks cannot realize an economy of scale, making mortgage rates unrealistic for most potential homeowners. ---- it is not explaining the conclusion.
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Re: For years, Pleasanton was a commuter community to industries in Middle   [#permalink] 01 Apr 2018, 03:39
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