Answer :
Leading up to the Great Recession, a major problem with computer models used by many banks to predict the performance of mortgage - backed securities was that the models were designed to assume that real estate prices would always rise.
What is a Bank?
A bank is a financial institution that deals in money. Bank is usually known for the safe deposits that can be made by individuals and for lending money to individuals for their capital expenditures.
Computer used by banks were used to predict the performance of mortgage backed securities but the model was designed to assume that real estate prices would increase all the time,
while this is not the case and in many situations especially in the recession the prices for real estate fall and as a result this will have impact on the performance of the mortgage backed securities.
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