Lack of Ethics
Mortgage Crisis: Are a Lack of Ethics to Blame?
Anyone who has been following the news is aware of the degree to which the housing slump has affected the overall economy. In the mid-1990’s, in an effort to help a person achieve the “American Dream” of home ownership, the Department of Housing and Urban Development partnered with the mortgage industry to develop several new type of loans. Products such as variable rate mortgages, low or no down payment plans, and financing in excess of a property’s purchase price were offered that would allow even the least financially capable of families to own a home. The rest as they say is history. Was it unethical behavior that caused or enhanced the mortgage crisis? It is unethical for someone to borrow money knowing they don’t have the ability to pay it back? If everyone who took out these mortgages were able to continue making payments, we would not be in this crisis today. Perhaps these individuals were swept up in the hype of the housing market and wanted to get in on the action. In many instances, people inflated their salaries on mortgage applications and now find themselves deeply in debt. In Exchange, a magazine of the Brigham Young University School of Business, one type of ethical dilemma discussed is “Saying Things You Know Are Not True.” By giving false information, the borrower entered into an ethical breach. Immanuel Kant, a famous deontologist, believed that in order to act in a morally correct way, people must act according to duty. Kant also believed that it was not the consequences of a person’s action that make it right or wrong, but the motives behind the action. One of the clearest examples of this idea is the duty to not make a lying promise. A borrower applying for a mortgage loan has the duty to correctly divulge financial information to a lender and to also acknowledge how much house they can afford. Realizing this to late and defaulting on a loan violates this duty.
Anyone who has been following the news is aware of the degree to which the housing slump has affected the overall economy. In the mid-1990’s, in an effort to help a person achieve the “American Dream” of home ownership, the Department of Housing and Urban Development partnered with the mortgage industry to develop several new type of loans. Products such as variable rate mortgages, low or no down payment plans, and financing in excess of a property’s purchase price were offered that would allow even the least financially capable of families to own a home. The rest as they say is history. Was it unethical behavior that caused or enhanced the mortgage crisis? It is unethical for someone to borrow money knowing they don’t have the ability to pay it back? If everyone who took out these mortgages were able to continue making payments, we would not be in this crisis today. Perhaps these individuals were swept up in the hype of the housing market and wanted to get in on the action. In many instances, people inflated their salaries on mortgage applications and now find themselves deeply in debt. In Exchange, a magazine of the Brigham Young University School of Business, one type of ethical dilemma discussed is “Saying Things You Know Are Not True.” By giving false information, the borrower entered into an ethical breach. Immanuel Kant, a famous deontologist, believed that in order to act in a morally correct way, people must act according to duty. Kant also believed that it was not the consequences of a person’s action that make it right or wrong, but the motives behind the action. One of the clearest examples of this idea is the duty to not make a lying promise. A borrower applying for a mortgage loan has the duty to correctly divulge financial information to a lender and to also acknowledge how much house they can afford. Realizing this to late and defaulting on a loan violates this duty.