Shawn Mutchler
Clara Gerl
Comp I
01 September 2013
Unethical Mortgage Lending and the Collapse of the American Economy Living in an era of economic uncertainty is an abysmal proposition that many of us thought improbable. However, we find ourselves in the midst of the worst financial quagmire since the Great Depression of the 1920’s. Across the United States, businesses are down-sizing and even closing the doors of peripheral branches. In realizing that there is no way to return to a period of economic prosperity America once enjoyed, it is important to look at the causes of its demise. While there are myriad causes for America’s financial collapse, it is important to focus on the role of ethics, or the lack thereof, in America’s current financial dilemma. Unethical practices, particularly in mortgage lending have helped to directly contribute to the collapse of the American economy. When discussing unethical behavior and the financial collapse of America, few topics receive more attention than the mortgage lending industry, and in that industry, most of the focus falls on subprime lending. Before looking at subprime lending, however, it is central that we look at the evolution of mortgage lending. Because the approach to mortgages has changed, we must take a glance at the past methodology of mortgage lending. As recently as the past twenty years, borrowers seeking mortgage loans would go to their local banker to apply for a mortgage. This banker was oftentimes known on a personal level, and cared very much whether the loan was a good idea, both by the bank and the borrower. As times changed, this was seen as an inefficient business model (Curtis 2). Enter the mortgage broker. As corporate managers continued to seek out ever higher profit margins, mortgage brokerages came into being. Mortgage brokers were charged with the task of seeking out borrowers, much