Ethics in the Mortgage Lending Business
In America each person believes it is his or her right to own a home. Banks believe they should give each person the money to finance a home. Countrywide was at the forefront for many years in providing loans to consumers. Their ethics were placed into question when homeowners started losing homes after 2006. Bank of America intervened to assist on home loans affected. Their strong code of ethics, team values, and guiding principles ensured clients that their loans would be secured. Ethics
During the time prior to the mortgage crisis, the economy was looking good to the mortgage brokers and lenders in the United States as well as new homeowners. After all, it is the ‘American Dream’ to own a home. It means they become part of a community that most plan to live in for the long term. If a person could not qualify for a home loan, it was surprising. Subprime and option adjustable rate mortgages (ARM) were given to high risk borrowers, at times with incorrect, little or no documentation. Business ethics were widely questioned after the crisis began. Many asked how did all parties involved allow this to happen? Many American’s blamed the lender, which in this case was Countrywide. Lending money in such a demanding market was easy for the company. Countrywide’s success prior to 2007 had come from the company lending money and then selling loans quickly in the secondary market to finance new loans. America is a supply and demand country, and before the crisis, home mortgages were in high supply. Some may argue that the company was greedy but others may say they gave the consumers what they wanted, a home. Home mortgages had increased by 72% during the period of 1999-2006. Prices of homes were increasing rapidly, up 63.1% during 1999-2006. Alleged violations by employees and consumers included inflating home appraisals, flipping loans, coaching borrowers, falsified documents, etc. Countrywide denied any wrongdoing. Consumer and the American Dream
Bank of America (Countrywide) was the nation’s largest lender that instilled trust in their consumer base. Their advertising campaign was commonplace through online and TV advertising, in which Countrywide was one of the Internet’s biggest advertisers. Although the consumer was focused on achieving the American Dream of a new or larger home, he or she was not contemplating the ethics in which the company conducted business. During the time of the lending crises, the economy was strong and consumers looked to a company that could easily qualify them for a mortgage. Lenders such Countrywide provided loans through any means, convincing the customer that refinancing to a fixed rate would be easy in a short period. January 2000, Countrywide was touted as an industry leader that would both buy and service of mortgages (Baldwin & Wiser, 2000). Finance advisors commented that when the financing booms end, their servicing of existing loans will become more valuable as loans become more stable, again strengthening customer confidence in the mortgage industry and the company’s stability. Consumers never imagined that a company with a reputation such as Countrywide had would ever conduct such unethical acts that would result in legal actions, public humiliation, and affect stockholder earnings so dramatically. Current Mission, Values, and Guiding Principles
Founded in 1969, Countrywide saw explosive growth in the late 1980s and the early 1990s, and its mission statement evolved to read, “Our mission is to quickly respond to your home ownership and financial needs.” Ironically, Countrywide’s aggressive lending practices have been criticized for helping, in part, to fuel the housing boom, and subsequent mortgage crisis. Countrywide faced a federal investigation and several lawsuits concerning its business practices in the subprime loans business. In 2008, the company was acquired by Bank of America Corporation, and the Countrywide name was...
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