Countrywide Financial and the Subprime Mortgage Debacle

Countrywide Financial Corporation and the Subprime Mortgage Debacle

The idea of the subprime loan isn’t unethical in itself, but the way it was packaged by Countrywide Financial easily contributed to unethical practices. The strategy involving these subprime mortgages wasn’t corrupt and if it had been adequately enforced and implemented, it could have served as a competitive advantage for Countrywide. Subprime borrowers generally have bad credit (under 620) or no credit history, low income, maxed out credit cards and poor debt-to-income ratio. Subprime loans give the opportunity for lower-income households to raise their wealth and their credit score. However, from not being able to afford a traditional loan to taking out a loan that is greater than what you can afford is a huge step and I believe that this was where the company crossed the line. People were given the ability to live above their means. Assisting those who had huge debts, or bad credit, or jobs that didn’t pay much was noble; the reasons for handing out those loans and the greed that took over made it completely unethical.

Countrywide Financial pursued many business practices that had ethical issues and this mostly contributed to the company’s downfall. They enticed people into the real estate market who were not equipped financially to persevere. Most Subprime borrowers were generally uneducated on loan borrowing and inexperienced and the company used this opportunity to encourage or at least aid consumers to lie about their income, which came back to damage them later. They provided “liar loans”, which required no proof of income or assets. They utilized predatory lending practices. They would seek naïve borrowers, pressure homeowners to refinance frequently and charge fees. Their Brokers were also unethical because they promoted loans that were not beneficial to borrowers but mainly to the lenders and themselves. There was a lack of truthfulness with the subprime loans. Important...