The Problem With Subprime Mortgages And Minorities

The problem with Subprime Mortgages and Minorities When it comes to buying a home there are a few things you need first. Of course you need money , but what if you don t have the money but you want to get a home? Well you would apply for a loan, but there are two loans you could qualify for and those two are known as prime loans and subprime loans. There are far too many cases where there are well qualified people with the credentials to get a prime loan but were denied, forcing them to settle for worse forms of credit such as subprime loan. The problem is that it is unethical to even offer these subprime loans because of the debt that it puts subprime borrowers in. Through my research I have gathered I have determined that well-qualifying minorities, in particular blacks and Hispanics, have been denied prime mortgages based on race and prejudices, making them easier prey for less convenient loans such as subprime mortgages, which results in higher default and foreclosure rates amongst minority residences. Subprime loans A subprime loan is a loan given to people who generally have bad to below average credit and are charged with higher interest rates because of past credit history. Subprime mortgages was designed to help those Americans who want to achieve the goal of homeownership for low-income minorities (Gorton 12). The unethical dilemma is that the lender has the choice to decide whether to refinance or not at the end of the first period without the borrowerShow MoreRelatedCountrywide Home Loans ( Countrywide Hl )1466 Words   |  6 PagesCountrywide Home Loans (Countrywide HL) provide, service, and sell mortgage loans and after-loan services such as collections and payment processing. As a leader in the mortgage industry, they provide these products and services to homeowners through prime and subprime mortgage loans and subsequently resell these loans to investors. In 2009, the United States (US) Treasury Department (Treasury) invested (i.e., US taxpayer-based funding) in Count rywide HL under the Treasury’s 2009 Troubled Asset ReliefRead MoreThe Subprime Mortgage Crisis in the U.S Essay1586 Words   |  7 PagesThe argument over who should be at fault for the subprime mortgage crisis and housing market collapse in the United States has been a heated debate. Even though home foreclosure keeps rising, there should be some accountability for the economic meltdown resulting from the subprime mortgage situation. Should we blame banking institutions, mortgage lenders, brokers, and investors for this crisis? Should minorities be blamed for recklessly accepting loans and defaulting on them after realizing theyRead MoreSubprime Lenders And The Financial Crisis865 Words   |  4 PagesSubprime loans are ethical tools which were wildly misused during the time leading up to the financial crisis in 2008-2009. Subprime lending targeted borrowers who would typically not qualify for standard loans for various reasons. These included low credit scores, low incom e, and history of late payments. The loans were offered at a rate higher than the market rate due to the increased risks of the borrowers. 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This argument is subject to a number of problems, namely: the CRA never mandated lower lending standards, the CRA was enacted over a quarter of a century before the housing crash took place, none of the hundreds of banks that collapsed were subject to CRA legislation, CRA loans had a historically low level of default, and CRA loans comprised an extremely low amount of subprime loans during the relevant period of the crisis. While the CRA may have played someRead MoreSimultaneously, The Community Reinvestment Act (Cra) Of1320 Words   |  6 PagesSimultaneously, the Community Reinvestment Act (CRA) of 1977 was forcing banks â€Å"to make loans to low-income borrowers, especially minorities and particularly African Americans, with a focu s on home loans...In order to make acquisitions, open branches, and generally grow its business, a bank must have a satisfactory CRA rating† (Allison, 2013, pp. 55-6). This essentially forced banks to make riskier loans than they otherwise would have. 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The company has lost its place as America s Home LenderRead MoreThe Role Of Government Affordable Housing Policy1424 Words   |  6 Pagesup this observation. â€Å"At President Clinton’s direction, no fewer than 10 federal agencies issued a chilling ultimatum to banks and mortgage lenders to ease credit for lower-income minorities or face investigations for lending discrimination and suffer the related adverse publicity. They also were threatened with denial of access to the all-important secondary mortgage market and stiff fines, along with other penalties. The threat was codified in a 20-page â€Å"Policy Statement on Discrimination in Lending†Read MoreSocial Policy Related to Individuals in a Rural Setting1611 Words   |  6 PagesGuidelines and Principles for Social Impact Assessment, 1994) Statement of Problem The problem addressed in this particular study is that of available suitable and energy efficient housing in rural areas and the tendency for rural low-income individuals to purchase mobile homes that are financed through mortgages characterized by predatory lending. The work entitled Subprime and Predatory Lending in Rural America: Mortgage Lending Practices that can trap low-income rural people published in 2006