Business

Topics: Mortgage loan, Mortgage, Debt Pages: 2 (523 words) Published: October 1, 2013
Look for videos or articles on the Corruption at Fannie Mae and Freddie Mac and on Countrywide Financial. What were the results of the banking industry's ethical decisions? Do you feel that if the banking industry would have made different ethical decisions that the Great Recession could have been avoided? Please list the links to your materials.

The United States of America sued Bank of America for $1 billion in mortgage fraud against Frannie Mae and Freddie Mac. In 2008, United States World Wide economic meltdown resulted from one of many reasons, the real estate market. Basically Countrywide financial was giving out mortgage loans from 2007 to 2009 without doing screen checks on whether or not the borrowers could afford them, and also making most of them out to employees of Fannie Mae and Freddie Mac. Fannie and Freddie buy mortgage loans from banks, package them into securities and sell them to investors. The idea is to free up banks to make more loans. If a loan defaults, Fannie and Freddie guarantee payments to the investors. According to the lawsuit, Fannie and Freddie don't review the loans before they purchase them. Instead, they rely on banks' statements that the loans meet certain qualifications. As a result, “the hustle” began. Employees were getting bonuses for the houses they sold instead of basing their employment on their quality and turnover rate. Instead of telling a default applicant this mortgage isn’t in your price range, the information entered into a computer was changed to show they approve for a loan that they probably couldn’t pay off, which in default Countrywide told and gave loans to Fannie Mae and Freddie Mac would say they can pay the banks for the loans if the prospect couldn’t, hint a recession and foreclosure of many homes. For example, one loan application, for a home in Miami, said that the borrower was an airline sales representative earning $15,500 per month, when the borrower worked for a temp agency and earned $2,666...
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