rates because of their deficient credit history. According to the U.S. Department of Treasury guidelines issued in 2001, "Subprime borrowers typically have weakened credit histories that include payment delinquencies i.e. non-payment of the mortgage, and possibly more severe problems such as charge-offs, judgments, and bankruptcies. They may also display reduced repayment capacity as measured by credit scores, debt-to-income ratios, or other criteria that may encompass borrowers with incomplete
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Ethical and Legal issues concerning sub-prime mortgage lenders Outline I. Introduction II. Subprime History III. What lead to subprime lenders making unethical and illegal decisions IV. What safe guards are in place V. Conclusions VI. Works cited page Introduction When most people hear the phrase “subprime lending”, the first thoughts that come to mind are the mortgage meltdown; predatory lenders, high interest mortgages for borrowers who have poor credit or low incomes
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Abstract: Insulating people from the effects of the crisis has left intact the habits of thought and the basic institutional structure. The continued reign of pecuniary values leaves intact the Goldman Rule: pursue profitable opportunities regardless the effects on others. Within a culture dominated by pecuniary values, profitable opportunities present a coercive force. Laissez-faire policies allow profitable pursuits without restraint. Subprime mortgages offered an opportunity to tap a new source of profits
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250 points when missed payments by subprime mortgage holders hit a four-year high. Later that month when the Senate Committee on Banking, Housing, and Urban Affairs held hearings on what analysts were already calling a mortgage market crisis, the issues of subprime lending was firmly thrust into the national spotlight By the time Congress began this effort to protect hard-working Americans from unscrupulous financial actors, however, subprime mortgages offered to borrowers whose flawed credit history
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What led to the housing crisis? Owning a home can be considered one of the biggest achievements in a person’s life. Whether it’s starting a family, becoming an adult, or running a business, becoming a home owner is an exciting thing for most people. However, the housing crisis of 2007 destroyed many dreams for recent home owners and sent the country into a nationwide panic that led to the biggest recession since the Great Depression. The housing crisis surprised many people since home prices has
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overall picture of the subprime mortgage crisis, how the subprime market was created, how the crisis happened, what were the result and its impact. (See appendix A - my summary of the case) The primary issues in this case are: why did the Wall Street bankers blindly trust that the risky mortgages were good assets to invest into? And why did everyone involved allow the whole thing to go this far? The Analysis The Wall Street bankers ignored the fact that the mortgages were risky is mainly due to
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Century." The claims are among the first to attempt to blame auditors for the subprime-mortgage crisis, which spread beyond lenders such as New Century and engulfed the global financial system. If the New Century trustee is successful, "it may embolden others to look more closely at the possibility of bringing [accounting] firms to some level of culpability for the things that happened" that led to the credit crisis, Francine McKenna, president of McKenna Partners LLC, a corporate-governance consultancy
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he causes of global financial crisis 1、Boom and burst in the housing market Low interest rates and large inflows of foreign funds created easy credit conditions. Subprime lending contribute to increase the housing demand.This fueled rising house prices.This housing bubble resulted in quite a few homeowners refinancing their homes at lower interest rates. This led to a building boom. Easy credit encouraged borrowers to obtain ARM. If borrowers could not make the payments ,they would try to refinance
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Moral Hazard and the Mortgage Industry Moral hazard describes behavior when the party responsible for the interests of another party has an incentive to put its interests first (Dowd, 2009). The possibility of it increases when the party does not necessarily suffer the consequences of its actions and thus becomes susceptible to taking more risk because it knows it would be protected. An example of moral hazard is the subprime mortgage crisis, which preceded and “triggered” (Bernanke, 2012) the
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trillion, was the worst financial crisis since the Great Depression. It was completely avoidable. A number of things occurred to create the economic crisis, including massive accounting fraud, securitization of mortgages, credit default swaps and synthetic CDOs to name a few. During the Clinton administration the Commodity Futures Modernization Act was enacted which banned all regulation of financial derivatives. Lenders no longer carried risk; they would sell mortgages to investment banks to create
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