Would you give a subprime mortgage to someone who couldn’t afford it?

[BrotherOfJesusChrist]

The mechanics of this business model are defined here:
http://query.nytimes.com/gst/fullpa...0575AC0A96F958260&sec=&spon=&pagewanted=print

Simply: You can give anyone a subprime mortgage who is willing to take it, irregardless of whether they can afford it or not, and then hand it over to Fannie to get back your money plus some. Easy money!


Speaking hypothetically:

If you asked me in 1999, when this business model became available, there is an 80% percent chance I would refuse on moral grounds. I would not willingly hand the taker (borrower) something that I know will ultimately financially ruin him for many years. Nor would I betray the trust of a crown (government) corporation so easily.

Fast forward to 2005-6, and you would find a different me. Witnessing unethical companies in my industry (again, role playing here) “making a killing” issuing subprime mortgages to anyone and everyone, the frenzy that then ensued by my peers to do the same, and all the housing market media hype, I would probably become delusional, and join the frenzy. The questions and rationalization that would predominate in my mind:
“How can it be wrong if everyone is doing it?”
“What difference does it make if I do it too?”
“Poor people won't think of getting these mortgages; they are not the one’s getting them, since the house prices are so high.”
“I can make an xxx amount of money in so little time. YAHHHOOOO! MORALS BE GONE! But I’m still good; I think….”

This time, there would be an 80% chance that I would be a participant in issuing subprime mortgages.


So, I’m going to have to answer yes to my own poll. Greed is that powerful. It is almost unintentional, and it certainly almost always oblivious. How do you avoid falling into this trap?

 

[SAPguy]

No ... I would not.

I wouldn't even need to look at it from a moral standpoint. It is a completely stupid business decision. Even if you are simply the broker, the result of doing this long term will result in not only the financial ruin of the individuals, but also of the financing institutions. This has already become obvious as our entire financial industry is in complete meltdown right now and more and more people are being foreclosed on by the day.

Once the financial institutions are in a state of disarray, you will be out of a job. Hope you saved all that cash you swindled people out of

 

[TFM_John]

How can you run a business with little chance of return on your investment? Evenually you would run out of money and be in a position where you couldn't help anybody.

 

[Servant of Jesus]

A business doesn't have a conscience- it is just there to make money. A business also doesn't "force" a loan on anyone.

It is the individual who applies for a loan that is responsible for deciding if he or she can afford it. The problem here is that too many people agree to borrow money under conditions that are in the best interests of the bank, but not necessarily in their best interests. So people are elated when a bank approves a loan, and never think about whether this is really good for them.