when moral hazards in investing lead to financial crises the demand for stricter government regulations often increases 
examples of moral hazardprior to the financial crisis of 2008 when the housing bubble burst certain actions on the part of lenders could qualify as moral hazards for example a mortgage broker working for an originating lender may have been encouraged through the use of incentives such as commissions to originate as many loans as possible regardless of the financial means of the borrower since the questionable loans were intended to be sold to investors shifting the risk away from the lending institution the mortgage broker and the originating lender experienced financial gains from the increased risk the burden of the risk would ultimately fall on the investors borrowers who began struggling to make their mortgage payments also experienced moral hazards when determining whether to attempt to meet the financial obligation or walk away from loans that were becoming more difficult to repay as property values decreased borrowers were ending up deeper underwater on their loans the homes were worth less than the amount owed on the associated mortgages some homeowners may have seen this as an incentive to walk away as their financial burden would be lessened by abandoning a property insurance coverage is also prone to moral hazard for example if someone buys the latest cell phone and takes out insurance on it they may be less likely to be careful with it the assumption that it will be replaced regardless of their level of care creates a moral hazard meanwhile replacement costs of damaged cell phones then drive up the cost of insurance for everyone who might purchase the coverage 