Interpreting Ethical Issues With Subprime Loans Essay

Interpreting Ethical Issues With Subprime Loans Essay

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Interpret Ethical Issues with Subprime Loans
Introduction
In paper will consist of a blog on the interpreting Ethical Issues with Subprime Loans. According to the United States Department of Housing and Urban Development defined subprime loan “a type of mortgage loan for individuals who do not qualify prime rate loans due to blemished or limited credit histories. These loans carry a higher rate of interest than prime mortgage loans to compensate for increased credit risks (4). These loans were created to allow individuals and households with blemished or limited credit histories, modest incomes, or insufficient funds for a down payment that otherwise would be prevented in buying a house or refinance an existing home. Since the early 1990s, the subprime mortgage market was slowly making a dent, but not until 2001 when the subprime mortgage market exploded due to the housing boom, and continued through 2006 (3, 5). In an eleven-year span between 1994 to 2005, the subprime loans have increased $630 billion, from $35 billion to $665 billion (5). With the housing started to bubble in 2006, according to Nassar (2007), the first three-quarters over 60% of all mortgages entering foreclosures were subprime, compared to 30% in 2003 (5). This caused the subprime market to collapse, which caused the housing crisis that led to the financial crisis in the United States. This blog will look at ethical issues surrounding subprime loans, and the risks they pose to the lender and borrower. Next, critiquing the role of leadership decision-making in the subprime loan financial crisis. Then evaluate subprime loans with the notion of social responsibility. Furthermore, comparing and contrasting the resulting consequences for these actions. Finally, m...


... middle of paper ...


...oan money to the customers, instead purchased the conventional conforming loans from the secondary mortgage market.

What measures have been taken since that time to assure this will not happen again
The following measures that have been taken since the subprime mortgage loan finacial crisis of 2007-2008, to help prevent this from happening again. The United States government bailout for financial institutions that were distraughted by the subprime mortgage crisis that led to the financial crisis, in which President George Brush signed the Emergency Economic stabilization act of 2008 ( ). This act creates the Troubled Asset Relief Program (TARP), which help the ailing banks with funds invested from taxpayer funds. Then in 2009, President Obama announces a U.S. program, the Homeowner Affordability and Stability Plan that is to help homeowners avoid foreclosure.


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