The subprime mortgage crisis has forced financial institutions to be extra stringent in granting mortgage loans. Many seemingly creditworthy applicants are having their loan requests denied. Thirty recent mortgage applications were obtained to analyze the mortgage approval rate. The response variable y equals 1 if the mortgage loan is approved, 0 otherwise. It is believed that approval depends on the percentage of the down payment x 1and the percentage of income-to-loan amount x2. Table 17.9 shows a portion of the data; the complete data set can be found on the text website, labeled Mortgage Applications. Estimate and interpret the linear probability model, y = β 0 + β1x1 +

β2x2 + ε . Make predictions of the approval probability for representative applicants.