Countrywide Financial Subprime Meltdown Ethics Mandi Hash

Countrywide Financial: Subprime Meltdown Ethics Countrywide Financial: Subprime Meltdown Ethics Mandi Hash Acct 430 81E – Krupka, Joseph Abstract â€Å"Not long ago, Countrywide Financial seemed to have everything going for it. Cofounded by Angelo Mozilo in 1969, by the early 2000s it had become the largest provider of home loans in the United States. At that time one in six U.S. loans originated with Countrywide. In 1993 its loan transactions reached the $1 trillion mark. Additionally, it was the primary provider of home loans to minorities in the United States and had lowered the barriers of homeownership for lower-income individuals. Countrywide also offered loan closing, capital market, insurance, and banking services to its†¦show more content†¦Many of the baby boomers started selling their houses to fund their retirement. Disposable income was becoming nonexistent. Despite all of these warning signs financial institutions kept on making risky loans, such as the subprime loans, and builders kept on building more houses for profit. The end result was a surplus of housing and no consumers able to afford it. Banks were forced to start foreclosing on houses when the consumers stopped paying their mortgages. Foreclosure rates were skyrocketing, causing investors and borrowers to feel the full effect of the risks of the subprime loans. The surmounting number of mortgage defaults and investors pulling out of their mortgage-backed securities caused a string of bank and financial institution failures. These failures were felt world-wide, as billions of dollars were lost. Many of the larger financial institutions required government assistance to stay afloat. In just over a year Countrywide depreciated and absorbed $21 billion in losses. Eight billion in subprime loans has a seven percent delinquency rate, as well as the foreclosure rate on the loans doubled. Countrywide laid off twenty percent of its employees. When Is Making A Subprime Loan An Ethical Thing To Do? When making a subprime loan it is the responsibility of the lender to discern whether the loan is a good risk for the borrower and the lender. If the loan is going to be a poor risk to the borrower