T/F 1. The existence of the mortgage interest deduction on taxes tends to reduce the sale...

T/F

1. The existence of the mortgage interest deduction on taxes tends to reduce the sale of homes.

2. Woods argues that while lenders were often bashed for causing the bursting of the housing bubble they were, in fact, doing exactly what the government wanted them to do.

3. Fannie Mac and Freddie Mae are examples of “government-sponsored enterprises.”

Solutions

Expert Solution

1. The existence of the mortgage interest deduction on taxes tends to reduce the sale of homes.- False.

In case of mortgage interest deduction on taxes, that is, mortgage interest paid on rental properties is deductible from tax payable the sale of homes tends to increase. This is so because this acts as an incentive for households to buy properties since it serves two purposes- households own their homes and their tax payable reduces.

2. Woods argues that while lenders were often bashed for causing the bursting of the housing bubble they were, in fact, doing exactly what the government wanted them to do.- True.

3. Fannie Mac and Freddie Mae are examples of “government-sponsored enterprises.” - True.

Government sponsored entreprises (GSEs) primarily act as financial intermediaries to assist lenders and borrowers in housing and agriculture. Fannie Mae and Freddie Mac, the two most prominent GSEs, purchase mortgages and package them into mortgage-backed securities (MBS), which carry the financial backing of Fannie Mae or Freddie Mac.

Rahul Sunny answered 11 months ago

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