Business Ethics -- Countrywide What Term Paper

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They also helped wealthier buyers qualify for larger loans than they could really have qualified for, to purchase larger homes or to take equity out of the property in a booming housing market. When many of the unqualified and under-qualified borrowers began defaulting, the entire industry collapsed. The situation threatened the entire national economy because the wealth of some of the nation's largest banks and investment firms depended on the quality of those mortgage loans. Billions of dollars in stock value were based on complex mortgage-backed securities based on those bad mortgages sold by Countrywide and others.

3. What are the ethical issues that need to be addressed (be specific; cite examples)?

Countrywide violated ethical rules and the law almost every time they sold a mortgage in the years leading up to the housing market collapse. They knew that many of the buyers would probably end up defaulting and they tricked many of them into thinking otherwise by emphasizing the monthly cost of variable-rate loans and temporary interest-only loans.

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They also knew that those bad loans were being sold to Wall Street firms misrepresented as safe "AAA-rated" debts and that those bad debts were being used to back stocks and the retirement pensions of millions of people.

4. What are the alternatives for the case characters (What could have been done differently)?

Countrywide is not a case with any realistic alternatives because there were no real "mistakes" or misjudgments. They knew exactly what they were doing and why it was unethical. The CEO promoted an unethical culture throughout the entire firm and unethical business practices became routine, expected, and rewarded. For a different outcome, Countrywide should have just sold mortgages only to qualified borrowers and exercised due diligence in lending, exactly as they were already required to do by law but had no financial incentive to comply with those….....

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