The loan company announced it would soon lend money to borrowers with

The loan company announced it would soon lend money to borrowers with proven records of their not paying back their loans on time, collectively known as the subprime lending market.

A.Of their not paying back their loans on time, [awkward]
B.Of not paying back their loans on time, a group [Most economy & correct]
C.Of not paying back their loans on time, with such a group [awkward]
D.That they do not pay back their loans on time, [They does not have proper antecedent]
E.That they do not pay back their loans on time, such a group [They does not have proper antecedent]

I agree to the above explanations but my doubt is "Shouldn't the preposition "of" be followed by a noun?"
Does "not paying back" plays the role of a noun?
Experts please let me know if I am missing something here.

The loan company announced it would soon lend money to borrowers with proven records of their not paying back their loans on time, collectively known as the subprime lending market.

A. of their not paying back their loans on time,"their" is incorrect. The "collectively" clause should be a noun modifier instead.

B. of not paying back their loans on time, a group possessive "their" clearly refers back to "borrowers"; placement of "their" is good. comma+"a group collectively" makes the last clause an appositive.

C. of not paying back their loans on time, with such a group "with such a group"

D. that they do not pay back their loans on time, "records that" unidiomatic. The "collectively" clause should be a noun modifier instead.

E. that they do not pay back their loans on time, such a group"records that" unidiomatic

The loan company announced it would soon lend money to borrowers with proven records of their not paying back their loans on time, collectively known as the subprime lending market.
This sentence has 2 errors.
Pronoun Usage: The pronoun “their” refers to “borrowers”. The pronoun or antecedent is not required at this location. Lets see the sentence with the antecedent:
The loan company will soon lend money to borrowers with proven records of borrowers’ not paying back their loans on time.
The expression “borrower’s not paying back” is incorrect.This should be corrected by simply deleting this occurrence of “their”. The sentence will make complete sense if it states – with proven records of not paying their loans”
Modifier Error: The modifier – collectively known as – is a verb-ed modifier. This modifier appears to modify the preceding noun – time. But this modification is non-sensical since “time is not known as subprime lending market”.
This can be corrected by changing the nature of modifier. Note that the modifier is worded such that it adds to the idea of the preceding clause. This clause talks about an action that is then named in this modifier. – subprime lending market. Thus, the modifier should be reworded as the modifier than can modify the preceding clause.

In D and E, record that is not idiomatic. The correct idiom is record of. Eliminate D and E.
In A, it is unclear what is being modified by collectively known. Eliminate A.

In C, it is unclear what is being modified by with such a group. Eliminate C.
The correct answer is B
In B, a group collectively known is in apposition to the the borrowers. Apposition is a structure in which two nouns are placed side by side; the purpose of the second noun is to define or modify the first. In the SC above, a group tells us more about the borrowers.

The loan company announced it would soon lend money to borrowers with proven records of their not paying back their loans on time, collectively known as the subprime lending market.

A - of their not paying back their loans on time, -- Modifier issue -- collectively known as .. market appears to modify the preceding noun – time. But this modification is non-sensical since “time is not known as subprime lending market”. ; pronoun their -- refers to borrowers , The expression “borrower’s not paying back” is incorrect.This should be corrected by simply deleting this occurrence of “their”. The sentence will make complete sense if it states – with proven records of not paying their loans”
B - of not paying back their loans on time, a group - Correct
C - of not paying back their loans on time, with such a group - It is not clear what the modifier “with such a group” modifies. In other words, it is not clear “who” or “what” is “with such a group”.
D - that they do not pay back their loans on time, -- undiomatic -- records that ... ; modifier issue -- same as A
E - that they do not pay back their loans on time, such a group -- undiomatic


Answer B

AjiteshArun , mikemcgarry ,daagh , egmat , GMATNinja , sayantanc2k , RonPurewal , other experts -- don't we need a that after announced here?

The loan company announced that it would soon lend money to borrowers with proven records

Dear Skywalker18,

I'm happy to respond.

This is a funny thing about official questions. GMAT official questions are perhaps the most rigorously tested questions in the world: each one has been used on the GMAT thousands of times, and so has a mountain of data behind it verifying its quality.

There is some variability in the quality--after all, the instruction is not to find the ideal answer but merely the best of five. Furthermore, sometimes a gross breach of GMAT SC standards occurs in an unrelated part of the non-underlined portion. Most people taking the test would focus exclusively on the underlined section and would validate the question based on that portion. If someone gets distracted by the absent "that" during the test, that would make it marginally more likely that this student would get the question wrong. In a way, that mistake can act as a distractor.

So, yes, of course the most formal and proper way to write this would be
The loan company announced that it would soon lend money to borrowers with proven records . . .
Absolutely, that would be the best.

What this particular official question has in the non-underlined portion is less than ideal. Don't let this fluster you. Don't allow yourself to spend intellectual or emotional energy on this point. Don't allow yourself to be distracted. Just accept it and move it.

Does all this make sense?
Mike

The loan company announced it would soon lend money to borrowers with proven records //their not paying back their loans on time, //collectively known as the subprime lending market.


A. of their not paying back their loans on time,

B. of not paying back their loans on time, a group

C. of not paying back their loans on time, with such a group

D. that they do not pay back their loans on time,

E. that they do not pay back their loans on time, such a group

noun+noun modifier could appear at the end of a sentence to modify a noun in the sentence. the noun modified could be far from " noun+noun modifier". the name for this sentence is resumptive sentence. dont care about the name. an example is

the lecturer teaches many smart students in his class of 2022 in the campus, the persons who have passed gmat with high score.

in above sentence, "persons who..." refers to ' students". the point is " persons..." is far from " students...".

choice B is an example of this kind of sentence.

regarding choice D.
"collectively known " is participle phrase working as adjective modifying a noun. but the point is that the noun modified must be close to the participle phrase. a noun far from participle phrase can not be modified this way. so, in choice D, "collectively known ..." can not modify "borrowers".

the difference between choice B and D is "farness" and "closeness".

regarding choice C.
"with +noun+doing/do-ed/adjective" can work as an adverb modifying the whole sentence and showing context, result or reason and other meaning relations with the main clause. in short, "with +such a..." modify the whole main clause. this is no sense.

gmat test us the basic and hard point of grammar. we need to learn basic grammar and this can be learned. gmat never test the grammar rules which is not basic and hard to remember.

Why is option C incorrect? I am unable to understand the role of a ,with modifier?