23. In the figure below, the dots represent the number of NO-or LOW- DOCUMENTATION mortgage loans (in hundreds) that banks made in 2006 at each FICO credit score from 500 to 800. Credit risk falls as the FICO score rises. The vertical line is at the FICO score of 620 - the threshold for including bank- originated mortgages in GSE-GUARANTEED mortgage-backed securities. (9 points) Identify and explain the information problem that this mortgage market reflects. How could the GSEs have solved the problem? What would have been the consequences in the mortgage market had the GSEs imposed the solution that you propose? 2006 40 30 20 10 0 500 600 700 800 AA 23. In the figure below, the dots represent the number of NO-or LOW- DOCUMENTATION mortgage loans (in hundreds) that banks made in 2006 at each FICO credit score from 500 to 800. Credit risk falls as the FICO score rises. The vertical line is at the FICO score of 620 - the threshold for including bank- originated mortgages in GSE-GUARANTEED mortgage-backed securities. (9 points) Identify and explain the information problem that this mortgage market reflects. How could the GSEs have solved the problem? What would have been the consequences in the mortgage market had the GSEs imposed the solution that you propose? 2006 40 30 20 10 0 500 600 700 800 AA