Answer:
A.They increased defaults and caused large losses at financial institutions.
Explanation:
subprime mortgages were house loans issued to customer in the early 2000. These housing loan were designed for borrowers with impaired credit history or with no credit history at all. A majority of borrowers who benefited from subprime loans were those with low credit scores would not allow them to get a conventional mortgage.
Everything went well until the 2006 when house price began to drop. At the same period , there was a rise in interest rates in the market. Due to a decline in house price, borrowers could not use their home equity to finance other interests payments and other bills.
Soon, their homes were worth much less than their mortgage balances. They could not sell the house or get refinancing operation using home's equity. the high interest rates were making matters worse. Customers would soon start defaulting. In time, customers realized their homes were less than what they paid for. The customers went to financial institutions demanding a refund for insurance money. The decline in house prices and demand for insurance caused a financial crises brought the US.
