Question

What are the differences between mortgage and mortgage-backed securities?

Can moral hazards still exist if there is no information asymmetry?

If your friend borrows from the bank at 9%, why would you be more willing to lend to the bank at 3% instead to your friend at the much higher interest?

How do conflicts of interest make the asymmetric information problem worse, esp. in financial markets?

Answer 1

Mortgage loan is a simple Mortgage loan which is used by purchaser of real property to raise fund to buy real estate or it can be used alternatively by existing property owners to raise fund whereas mortgage backed securities will be those secured loans which are Mortgage oriented but they will be backed by Assets and in case of faultering of those loans assets will be used for recovery

There will still be moral hazards because of behavioural bias and moral hazard will still be existing even if there will be information asymmetry because people will be driven by greed and they will be trying to cheat and default in order to gain so there will still be moral hazards if even if there is no information asymmetry.

there is a default risk associated with the direct payment with friend but there is no default risk associated with banks because banks are generally solvent in nature and friend can default so the risk of insolvency is leading for the acceptance of low rate.

conflict of interest will be leading to more of the information asymmetry as people will be trying to hide sensitive informations and they will be trying to not provide material informations and they will be trying to to make people invest into their businesses it would be leading to conflict of interest so, there will be nondisclosure of information.