The United States of America is currently involved in what is called the “subprime mortgage crisis.” During the years of 2006-2007 the price of real estate began to drop at a steady rate making it difficult for the average person to refinance. This in turn caused the global financial catastrophe that we are in now. The mortgage company is a disarray and too many innocent families are being forced into a foreclosure fiasco because of it. Just two years ago there were only two ways to get a home loan: a fixed rate, or a basic adjustable rate mortgage. It is now estimated that there are 200 different types of loans. This paper will explore, identify, and discuss the ethical issues surrounding the subprime mortgage crisis.
The main problem with subprime mortgages is that most average people do not understand the terminology involved with it, therefore causing them to fall into a disaster that they did not see coming. The subprime mortgaging crisis has brought about many ethical issues. These four main ethical issues involve: 1) the mortgage companies, banks, and other financial institutions over the mortgage products they offered and marketed to consumers, 2) the mortgage brokers who arranged mortgage loans for home buyers, 3) institutions and individuals that invested in sub-prime mortgage backed investments and finally perhaps the most hurt throughout the crisis, 4) the home buyers and home owners who signed up for these mortgages.
The mortgage companies, banks and other financial institutions are possibly most at fault for this disaster. They were basically giving mortgages out to borrowers who they knew would eventually be unable to make the payments in the long run. The banks began to use a strategy involving “teaser” rates, ...