2019-01-25T09:31:31+00:00 Assignments

Subprime Lending Fiasco

This paper concentrates on the primary theme of Subprime Lending Fiasco in which you have to explain and evaluate its intricate aspects in detail. In addition to this, this paper has been reviewed and purchased by most of the students hence; it has been rated 4.8 points on the scale of 5 points. Besides, the price of this paper starts from £ 40. For more details and full access to the paper, please refer to the site.

Subprime Lending Fiasco

Subprime Lending Fiasco

The Subprime Fiasco began at around 2006 when most people began defaulting on loans, which amounted to about 250 billion dollars. At the same time, the country suffered a financial meltdown prompted by the adoption of the subprime mortgage method; a method that allows individuals with poor credit rating to secure loans for the property they are acquiring. By the end of the year 2008, the US and the Global, market was already feeling the pinch of the fiasco since recession had taken root. What was known to be a business boom for securing homes became the problem towards the global market as neither the institutions that had issued these mortgages could back up these investments and this resulted to a recession (Langley 9).

Ethical Failures that led to the Subprime lending Fiasco

According to Bianco (2), there are several reasons that studies show to be behind the fiasco. These are unscrupulous behavior on the side of the mortgage brokers and lenders, poor decision that were being made by the mortgage borrowers and intensified saturation by the investors. Each of these can be viewed to be an unethical failure resulting from the stakeholders decisions compared to the decisions they are supposed to make. To understand each, one must begin by comprehending the state of affairs in the country and the major stakeholders who are blamed to behind the collapse of the economy.

As Bianco (3) notes prior to the subprime lending was gaining a high level of popularity, most people who were looking out for loans to purchase assets mostly land or houses would go to the financial institutions set out their terms and the banks would fashion their products just as they discussed in their contracts. However, as the concept of mortgage brokerage began gaining increased attention since these brokers would act as go between, the lending institutions began to lose their power to get customers towards purchasing their products. At the same, time most of the borrowers, seeking the subprime mortgage had a lower credit score of about 620 and they still did want to have loan to finance property investments.

Unscrupulous Behavior of the mortgage brokers and the lenders

Unscrupulous behavior of the mortgage brokers and the lenders is viewed as an ethical concern since these were the individuals that were lending the funds or connecting the borrowers to the lending institutions. They were the institutions that were ready to give loans to individuals with lower credit ratings and who had a high risk of defaulting. In the same instance, the central banks were flooding the markets with the capital liquidity and the rate of interest collapsed prompting investors to look for riskier investments as they could afford to get the loans to do this (Langley 3).

The banks who were also investors began looking out for ways to increase their profit making avenues by lending to as many people as possible so long as they showed willingness to invest and make return. The subprime mortgage arose as one of the avenues where


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