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Review on Business Ethics Case

In a narrative format, discuss the key facts and critical issues presented in the case. Word count: 158 Countrywide Financial began in 1969 and by 2000 was one of the nation’s largest lenders (Ferrell, 2010). In the late 1990’s and early 2000’s, Countrywide Financial offered subprime mortgage loans. Subprime mortgage loans were loans that were offered to people who would not ordinarily be able to qualify for conventional loans because of Income, lack of credit or low credit score.

Because of the structure of these mortgage loans, people found It hard to make payments when the economy slowed down.

The real estate market and the economy was negatively affected by the large number of people who were unable to make payments on their mortgages. Countrywide Financial’s earnings were posltlve until 2007, when the economy slowed and real estate prices dropped. In 2008, Bank of America bought Countrywide Financial.

Bank of America had more assets that could handle the crisis, and Bank of America would be able to handle the ethical investigations involving Countrywide’s questionable lending practices.

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Reference: Ferrell, O. C. (2010). Business Ethics: Ethical Decision Making and Cases, 8th Ed.. Cengage Learning What were the incentives for Countrywide to write so many subprime loans? Word count: 168 Countrywide Financial benefited financially from offering subprime mortgage loans.

Since the interest rate, fees and terms of subprime mortgages are typically higher than conventional loans, the lenders are able to profit from this type of loan (Moulton ; Bozeman, 2011). Between 1982 and 2003, Countrywide reported substantial earnings, and the offered profitable returns on stock investors.

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By offering mortgages and loans to borrowers who would not ordinarily qualify, the ees and interest were collected from thousands of borrowers with this type of loan.

They also extended loan privileges to a large amount of the population who would not ordinarily be able to own homes. I feel that Countrywide Financial’s Incentive for offering subprime mortgage loans was for financial benefit. I believe that they should have known the effects these types of loans would have If the economy took a downturn. They were too Interested In the profits to be made and continued the practice despite the negative effects It would have on people and the country as a whole. Moulton, S. , & Bozeman, B. (2011).

The Pulicness of Policy Environments: An Evaluation of Subprime Mortgage Lending. Journal of Public Administration Reseach & Theory, 21(1), 87-115. dot:10. 1093/jopart/muq005 Ferrell, O. C. (2010). Business Ethics: Ethical Decision Making and Cases, 8th Ed. , What was Countrywide’s logic in thinking that originating loans for people with poor credit ratings would result in positive outcomes? Word count: 182 Before the real estate crisis, the subprime mortgage industry was praised for helping people attain homeownership (Ferrell, 2010).

Subprime mortgages helped minorities and lower income people be able to afford to own a home. At the time, it was thought of as a positive financial tool. Since there were more people being able to attain loans to own a home, other industries benefited from the effects of the subprime mortgage practice. Contractors, the building supply industry and real estate agencies were all profiting from these lending practices. It seemed that these types of loans were helping many industries. In a speech given by Govenor Edward Gramlich in May, 2004 (www. federalreserve. v), he spoke of these lending practices and said “the increased availability of subprime mortgage credit has created new opportunities for homeownership and has allowed previously credit-constrained homeowners to borrow against the equity in their homes to meet a variety of needs”.

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Review on Business Ethics Case. (2018, Oct 18). Retrieved from https://studymoose.com/review-on-business-ethics-case-essay

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