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    Name:Aishen D. Reyes Chapter 5-Case Study

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    Aisy Aishen Reyes
    This document discusses the ethical issues surrounding subprime loans and Countrywide Financial's collapse. [1] Subprime loans were intended to expand access to credit but were often misused by predatory lenders to exploit borrowers who could not afford the loans. [2] Countrywide Financial collapsed in part due to incentives that encouraged risky lending practices, such as offering subprime loans to unqualified borrowers. [3] Bank of America must thoroughly investigate potential misconduct at Countrywide and ensure proper treatment of customers, investors, and employees going forward.

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    Name:Aishen D. Reyes Chapter 5-Case Study

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    Aisy Aishen Reyes
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    This document discusses the ethical issues surrounding subprime loans and Countrywide Financial's collapse. [1] Subprime loans were intended to expand access to credit but were often misused by predatory lenders to exploit borrowers who could not afford the loans. [2] Countrywide Financial collapsed in part due to incentives that encouraged risky lending practices, such as offering subprime loans to unqualified borrowers. [3] Bank of America must thoroughly investigate potential misconduct at Countrywide and ensure proper treatment of customers, investors, and employees going forward.

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    This document discusses the ethical issues surrounding subprime loans and Countrywide Financial's collapse. [1] Subprime loans were intended to expand access to credit but were often misused by predatory lenders to exploit borrowers who could not afford the loans. [2] Countrywide Financial collapsed in part due to incentives that encouraged risky lending practices, such as offering subprime loans to unqualified borrowers. [3] Bank of America must thoroughly investigate potential misconduct at Countrywide and ensure proper treatment of customers, investors, and employees going forward.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    44 views1 page

    Name:Aishen D. Reyes Chapter 5-Case Study

    Uploaded by

    Aisy Aishen Reyes
    This document discusses the ethical issues surrounding subprime loans and Countrywide Financial's collapse. [1] Subprime loans were intended to expand access to credit but were often misused by predatory lenders to exploit borrowers who could not afford the loans. [2] Countrywide Financial collapsed in part due to incentives that encouraged risky lending practices, such as offering subprime loans to unqualified borrowers. [3] Bank of America must thoroughly investigate potential misconduct at Countrywide and ensure proper treatment of customers, investors, and employees going forward.

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    Name:Aishen D.

    Reyes
    Chapter 5-Case Study

    1. Are subprime loans an unethical financial instrument or are they ethical but misused in a
    way that created ethical issues?

     Subprime mortgages are thought of as morally-sound financial tools, but their


    inappropriate use raises more questions. Subprime loans are taken out by those who
    wouldn't qualify for conventional loans. These consumers pay more for their subprime
    loans than the market rate. The objective of subprime loans was to let people borrow
    money to buy a house even when they have problems receiving standard loans, however
    many lending companies have severely exploited this unethical instrument. The
    subprime loans were never meant to be a money maker for the lending companies.
    Various sectors' greedy executives and salespeople benefit from these loans.

    2. Discuss the ethical issues that caused the downfall of Countrywide Financial.

     Countrywide Financial was the largest provider of home loans, but in 2007 the company
    disclosed over $20 billion in company depreciation and that it had absorbed over $1
    billion in losses. One of the ethical problems that led to Countrywide Financial's demise
    was that it appeared to be a problem with Countrywide sales people being given
    extensive time to engage in riskier transactions so that the company should continue to
    grow at a rapid rate, even including offering loans to people who couldn't afford them.

    3. How should Bank of America deal with potential ethical and legal misconduct
    discovered Countrywide?

     Countrywide Financial was the largest provider of mortgage loans. Bank of America has
    a history of treating everyone wrong, including its customers, stockholders, investors, the
    government, and even its own workers. One of the ethical issues that contributed to
    Countrywide's financial collapse was the appearance of a problem with the company's
    salespeople receiving incentives to engage in risky business dealings so the company
    should continue to grow quickly, even going so far as to provide subprime loans to
    people who qualified for them. The business disclosed in 2007 that it had incurred losses
    of more than $1 billion and that the company had appreciated by over 20 billion dollars.

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