The Crisis Of The Subprime Loan Scandal

The mortgage crisis of 2007 marked catastrophe for millions of homeowners who suffered from foreclosure and short sales. Most of the problems involving the foreclosing of families’ homes could boil down to risky borrowing and lending. Lenders were pushed to ensure families would be eligible for a loan, when in previous years the same families would have been deemed too high-risk to obtain any kind of loan. With the increase in high-risk families obtaining loans, there was a huge increase in home buyers and subsequently a rapid increase in home prices. As a result, prices peaked and then began falling just as fast as they rose. Soon after families began to default on their mortgages forcing them either into foreclosure or short sales. Who was to blame for the risky lending and borrowing that caused the mortgage meltdown? Many might blame the company Fannie Mae and Freddie Mac, but in reality the entire system of buying and selling and free market failed home owners and the housing economy.

The world is full of financial hardship, and American society possesses a great deal of controversy concerning lending. Unfortunately, short term lending, such as payday loans or title loans, creates a structural void within American society. According to Wikipedia, “Structural inequality is defined as a condition where one category of people are attributed an unequal status in relation to other categories of people” (wilipedia.com). When working class Americans apply for a payday, the unequal status between upper and middle class possess a bigger separation financially. The never-ending process of a short term financial fix becomes lifelong debt. Thus, middle class society becomes lower class society. Eventually, working class society will struggle to say above the poverty line. In addition to an imbalance in society classes, short term lending targets consumers who life paycheck to paycheck. In Rigging the Game by Michael Schwalbe, the author explains the reproduction of inequalities. Schwalbe discusses the different kinds of capitals human, social, and cultural (10). The three capitals unknowingly shape Americans social system. Many businesses capitalize on these capitals knowing no laws or regulation exists to stop them from capitalizing on individuals who no faults of their own were born into these unfair capitals. As a result, short term lenders possess the ability to have extremely high interest rates and outrageous fine print penalties because there is little

The setting of a rundown house in a poor neighborhood gives the impression of their struggle to survive as African Americans. The shabbiness of the exterior suggests their low social status. “A relatively recent addition to the house and running its full width, the porch lacks congruence. It is a sturdy porch with a flat roof. One or two chairs of dubious value sit at one end where the kitchen window opens on to the porch. An old fashioned ice box stands silent guard at the opposite end” (Wilson, setting description). While the newly added porch may represent an attempt to

The bursting of the housing bubble, known more colloquially as the 2008 mortgage crisis, was preceded by a series of ill-fated circumstances that culminated in what has been considered to be the worst financial downfall since the Great Depression. After experiencing a near-unprecedented increase in housing prices from January 2002 until mid-2006, a phenomenon that was steadily fed by unregulated mortgage practices, the market steadily declined and the prior housing boom subsided as well. When housing prices dropped to about 25 percent below the peak level achieved in 2006 toward the close of 2008, liquidity and capital disappeared from the market.

Poverty and inequality cripple America in every state and region of this country. These social problems overlap between social class and different cultures. As we read Evicted by Matthew Desmond, and Hillbilly Elegy, by J.D Vance, these problems were brought to the forefront in their own unique way. Evicted focused on the lower class level of urban poverty in the city of Milwaukee, Wisconsin. The people that were highlighted in this book were struggling to make ends meet every month, and keep food on the table. Many of the families that we read about were evicted countless times, and struggled to stay out of local homeless shelters. Hillbilly Elegy focused more on the struggles of the working class, and how the people of

Initially, Matthew Desmond’s book Evicted represents a profound and realistic ethnography about people’s day-to-day experiences of poverty with a particular focus on the outcomes of housing instability within the state. He exploits the evidence from housing court administrative records, excerpts from the news, and different surveys of renters to support his point of view revealed in the book. In his work, Desmond raises questions why the state is introducing the housing policy that deteriorates the position of tenants renting from private landlords and how a person with the monthly income of $628 and rent of $550 can not only provide his family but also survive. In Evicted, Matthew Desmond reasonably criticizes the American housing system according to which most of the low-income tenants are left alone in the private rental market and have no options to receive affordable apartments.

Even though Countrywide stopped offering subprime loans 4 months ago, the company is still in the forefront of the subprime mortgage lending and foreclosure crisis.

Michael Hudson tells the stories of victims with many compelling storied who were tricked into signing up for risky high-cost loans, as well as the greedy lenders who scarified the lives of their victims to gain as much money and power as they could. Hudson begins his story with an explanation of deregulation and the resulting emergence of subprime mortgage lending firms in California. Roland Arnall was a pioneer of the S&L industry, and Hudson traces how Arnall’s lending operations grew into the nation’s biggest subprime lending empire, Ameriquest.

Wealth is measured by assets such as properties, bonds, savings, and checking accounts minus debts and these assets provide a sense of privilege that can last for generations. For example, the name Kennedy is an asset because the name can open so many opportunities for a Kennedy even if they are not worthy of the opportunity. One of the biggest inequalities in the inner city is property inequality. People in the inner city cannot afford to own any property of their own and if they manage to own a home their mortgage loan is higher than their white counterpart due to “predatory lending practices in the United States”. (Massey and Rough) People in the inner city were identified and exploited by these banks by providing these loans they knew they could not afford. (Porter)

Thesis statement: The upper middle class residents of South End proudly expressed their love for diversity in the community yet romanticized being helpful by controlling and reconstructing the original residential norms. In condemning the routinely behaviors and common establishments in the neighborhood, it became evident that their true intent was to control the population.

The lack of dignity that these individuals feel is a direct effect of society’s disrespect for the lower class. The stereotypes of the homeless conceived by upper social classes, cause the lower class to lose any respectable role they may have in society. A homeless man in Oberlin, Ohio says, “Many of us historically invisible people, in our quest for visibility, have chosen to take the routes of organization and alliance building. Often we tend to find that our muted voices have more resonance, bass, and credibility within these snugly, institutionally sanctioned cubby holes” (Laymon). After failing to get sufficient help through

As a topic for this research paper, I decided to analyze the ethics behind the recent mortgage crisis in the United States. Banks were approving people for loans very easily, to people they knew would not be able to pay them back. Thus, many people were buying homes, missing payments, getting foreclosed on, and ruining what credit they had. Throughout this paper I intend to show how the practices that the banks were using were unethical. I will show who stakeholders were, and analyze them through Utilitarian and Kantian standpoints.

The U.S. subprime mortgage crisis was a set of events that led to the 2008 financial crisis, characterized by a rise in subprime mortgage defaults and foreclosures. This paper seeks to explain the causes of the U.S. subprime mortgage crisis and how this has led to a generalized credit crisis in other financial sectors that ultimately affects the real economy. In recent decades, financial industry has developed quickly and various financial innovation techniques have been abused widely, which is the main cause of this international financial crisis. In addition, deregulation, loose monetary policies of the Federal Reserve, shadow banking system also play

One of the first indications of the late 2000 financial crisis that led to downward spiral known as the “Recession” was the subprime mortgages; known as the “mortgage mess”. A few years earlier the substantial boom of the housing market led to the uprising of mortgage loans. Because interest rates were low, investors took advantage of the low rates to buy homes that they could in return ‘flip’ (reselling) and homeowners bought homes that they typically wouldn’t have been able to afford. High interest rates usually keep people from borrowing money because it limits the amount available to use for an investment. But the creation of the subprime mortgage

The collapse of the subprime mortgage market causing a global financial crisis (GFC) in 2007, has given the concept of securitisation a bad name. Securitisation is the process of conversion of receivables and cash flow generated from a collection or pool of financial assets into the marketable securities. Any asset that generates a cash flow can be securitised, which are then sold to capital market investors. Asset securitisation is the process whereby interests in loans and receivables are packaged and sold in the form of an asset-backed security (ABS). An ABS is the bond or notes backed by some financial assets. These assets consist of receivables such as residential and commercial mortgage loans, automobile loans, and credit card financing. Mortgage-backed securities (MBS) are bonds that are backed by pools of mortgage loans. Examples include mortgage papers, house papers, and land and property papers. Thus in-turn, reflective of the underlying assets in the security are these two terms. Additionally, securitisation is a method of financing assets, to serve as the main source of payment to investors, it usually depends on cash flow generated from principle and interest repayments.