According to Ferrell et al., (2011) the key facts and critical issues of the Countrywide Financial Meltdown were due to several different mishaps. In this case study, I have read that this organization was established to aid consumers with the ability to make purchases without a set criteria amount of revenue at their disposal. The issues came about when the customer would begin the repayment process. They start to claim they were unaware of the interest-rate because would be prudent onto the loan; they would fault the lender for late fees, excessive fees attached to their loans, and other default issues. Although these were some significant acquisitions, the institutions were permitted to rebuttal their claims. However, “another financial …show more content…
These individuals purchased items under pretense thinking they would be able to buy a home despite their mishaps such as outstanding medical debts, divorce issues and unemployment factors that Countrywide was willing to disregard. “Countrywide creates specialized divisions to work to help the borrowers and actively informed their customers about their options (Ferrell, 2011) p.388.” Therefore, allowing these poor people to own their property would be a dream that could come true, which was a misleading strategy. In fact, throughout the article, I would find examples of various ways this dream became a nightmare. For example, a lot of these homes were funding through government access, which means, we all know the amount of trouble an individual can encounter from defrauding the government. However, Countrywide neglected to look beyond the consumer’s purchasing of the property. In fact, the company did manage to supply the user with the funds for purchasing the property and making the return payment process economically convenient for the customers to repay. However, they never explored the risk factors or expose the users to the entire loan process. These methods cause a great strain on the company by making them appear as dishonest and the customers by making them leery of entrusting any other organization these are the ethics that caused the meltdown of Countrywide financial
After the terrorist attacks of September 11, 2001 many New Yorkers and New Jerseyians were looking for a safe haven away from the turmoil of the aftermath. Many sought this refuge in the Pocono Mountains in Pennsylvania. Touting a short drive to New York City, many local home construction companies saw this as an opportunity to sell houses and turn a profit. Many of these companies were reputable and upstanding businesses that produced a quality product at a market ready price. However, some of these companies were not so upstanding and as a result many unsuspecting homeowners were scammed out of thousands of dollars and just as many ended up in foreclosure. It became very clear early on that something was not right with many of the new home transactions involving a company called Rain Tree Homes, and so the Y-Rent scam slowly unfolded.
Through the use of statistics, expert testimony, appeals to emotions, and a few comparisons, Scurlock tries to convey his message, saying that because the lending industry’s main concern is maximizing profits, they have made it impossible to not have a credit card and avoid being taken advantage of. He accomplishes his goal of clearly relaying his argument to the audience with the high amount of credible support he provides.
Leading up to the crisis of the housing market, borrowers got mortgages without understanding the terms. Banks were giving out loans to people the banks weren't sure could pay the money back. The closer to the crisis, the higher the frequency of illegitimate loans and mortgages. Because there were so many mortgages on houses that could not be paid back, millions of mortgages were foreclosed on, and the houses we...
A majority of mortgage defaults that Americans used were on subprime mortgage loans, which were high-interest-rate loans lent to people with high risk credit rates (Brue). Despite knowing the risks, the Federal government encouraged major banks to lend out these loans to buyers, in hopes, of broadening ho...
The Sub-Prime Mortgage Crisis of 2008 has been the largest financial crisis to take place since the end of the Great Depression. It was the actions of individuals and companies that caused this crisis. For although it could have been adverted, too much money was being made by too many people in place of authority to think deeply on the situation. As such, by the time actions were taken to attempt to rectify the situation, it was already too late. Trillions of dollar of tax payers’ money was spent trying to repair the situation that was caused by the breakdown of ethics and accountability in the private sector. And despite the government’s actions to attempt to contain the crisis, hundreds of thousands lives were negatively affected before, during, and after this crisis.
While selling housing contracts to poor black homeowners was extremely profitable for lenders, it was also an unethical and economically devastating practice. Beryl Satter says “It was like people who like to go out and shoot lions in Africa. It was like same thrill” (gtd. in Coates). Lenders became rich by thrilling and making blacks struggle in an unethical world. Cosates says a man called Lou Fushanis owned more than 600 properties and his estate that worth about $3 million. These were all made by killing blacks, because “The kill was profitable” (Coates).
In “The Big Short”, this movie about the economic collapse of 2008 in America highlights how Americans of all racial backgrounds were hit hard when the housing market collapsed. The film provides a very compelling argument and describes how the market crashed because banks began to give out more unstable loans out to people in order to sell more properties, which eventually led to the housing market to be built upon millions of risky loans. This practice grew until the housing market became too unstable because of all the risky loans and resulted in an economic crash. The housing market collapse led to millions of Americans to lose their homes because of foreclosures and led to massive amount of homelessness and unemployment since the Great
First, the causes of the foreclosure crisis must be examined. I don’t think that the causes are all that complicated. In the end, the cause is twofold: First, people were buying houses they couldn’t afford, and banks were lending money to these people. Second, banks were engaging in unscrupulous lending practices. They were charging people money that these people neither were expecting to pay nor were able to pay. They were advertising one interest rate and actually putting another in the contract. I’m not sure what the law says about this last bit, but that sounds a lot like ‘fraud’ to me. If my reader disagrees, then I ask him to imagine the following:
Mullard, M. (2012). The Credit Rating Agencies and Their Contribution to the Financial Crisis. The Political Quarterly, 83, 77-95
Freddie Mac was accused of either lying or misrepresenting the facts in order to make the amount of risk they were taking appear smaller. Investigators believed that this was done in order to comfort investors. The mortgages they were talking about, the ones that were considered risky were sub-prime loans, and they were prone to failure. A lot of these people should never have been given loans with interest rates that high. It was the job of Freddie Mac to hel...
Countrywide’s business tactic was “Fund ‘em”. If a person does not have a job, or any assets the answer was still “Fund ‘em”. This is a practice called subprime lending which allows loan...
The forced liquidation of some $3 trillion in private label structured assets has been deprived from the financial markets and the U.S. economy has obtained a vast amount of liquidity that the banking system simply cannot restore. It is not as easy to just assign blame within these case however it is noted that the credit rating agencies unethical decisions practices helped add onto the financial crisis of 2008 and took into account the company’s well-being before any other stakeholders.
Mortgage loans are a substantial form of revenue for the financial industry. Mortgage loans generate billions of dollars in the financial industry. It is no secret that companies have the ability to make a lot of money by offering a variety of mortgage loan products. The problem was not mortgage loans but that mortgage companies were using unethical behavior to get consumer mortgage loans approved. Unfortunately, the Countrywide Financial case was not an isolated case. Many top name mortgage companies have been guilty of unethical behavior. Just as the American housing market was starting to recover from its worst battering since the Great Depression, a new scandal, an epidemic of flawed or fraudulent mortgage documents, threatens to send not just the housing market but the entire economy back into a tailspin (Nation, 2010).
Individuals like the two young and rambunctious mortgage consultants portrayed in the film gave loans to anyone and everyone that could sign the paper, regardless of the recipient’s ability to pay the loan in full. It is doubtful that all consultants fully understood the ramifications of their actions, but undoubtedly the overall disregard for consequence was the start of the collapse. Mortgage consultants mislead and tricked people into loans they could never afford by playing on their desire to live the American dream. Distributing adjustable rate loans to individuals without jobs, without collateral is unconscionable. Unfortunately, from their perspective they were helping these individuals. In a twisted way, these consultants were acting ethically from a utilitarian point of view. The consultants won because they received utility in the form of a bonus for distributing the loans, and the loanee won because they could now afford the home of their dreams. What the consultants didn’t consider in their calculations were the long term results and utility of their actions, unethically building the flawed foundation of the housing
The study defines “default” as a risk to the repayment history of borrowers where the borrowers have missed at least three installments in 24 months. This shows a symbol and indication of borrower behavior that will actually default to cease all repayments. This definition does not mean that the borrower had entirely stopped paying the loan and therefore been referred to collection or legal processes; or from an accounting perspective that the loan had been classified as bad or doubtful, or actually written-off (Pearson & Greeff, 2006). While, McMillion (2004) states that default is the risk where the borrower is unable to pay the loans. Default risk increases if a borrower has a large number of liabilities and poor cash flow.