Final answer:
The statement regarding lenders using short term loans for eventual placement into permanent mortgage financing is true, especially in the context of loan securitization, where loans are originated and then sold on a secondary market. Option A
Step-by-step explanation:
The statement that a possible placement method lenders must be aware of is loans with short terms for permanent mortgage financing is true. Typically, mortgage terms span across 15 to 30 years. However, in certain financial practices, a loan with a much shorter term may be used initially until permanent mortgage financing is secured.
This practice might be particularly relevant in the context of loan securitization, a process in which banks or other financial institutions may originate loans and sell them on the secondary loan market. This can provide incentives for banks to issue subprime loans, which are characterized by less rigorous credit checks and can include features such as low down-payments and initial low payments that escalate after the first few years.
The ability to sell these loans allows banks the flexibility not to depend on their own capital reserves and hence offer shorter term loans that will later be refinanced into a typical 30-year mortgage. Option A