Countrywide Financial Consumer Protection and Research Paper

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He defined the ideals that people share about how people ought to behave a "categorical imperative" - a transcendent concept of "rightness of action." No one would want to be taken advantage of the way Countrywide did, and under no circumstances did they themselves believe their actions were "right."

Egoism or self-interest ethics may explain the Countrywide rationale, after all, they were acting to advance own interests, over all else. Although some conduct is "right" when it advances personal interests, Countrywide's motive was actual "greed" because greed includes "excess" -- demanding more than one is entitled to. Egoism assumes that there is no "entitlement," others also have interests, and interests can and should compete. No one is "more deserving" than another. This also is Adam Smith's view of the market: buyers and suppliers with opposing interests (buyers want the lowest price and suppliers want the highest price) seek a transaction, to buy or to sell. Countrywide so skewed the negotiations in their own best interests that Mr. Smith would have been appalled.

Pursuant to the ethics of social group relativism, we assess Countrywide's conduct by understanding what our social group expects of us. While the term "relativism" has been misunderstood to imply that "anything goes," here the term simply means that standards of conduct in business are governed by the expectations of others on our behavior. "We conform." Countrywide obviously did not.

Each of these categories identifies a different kind of standard for making choices, and refers to some interest that is valued or preferred. We may not share the same interest or preference, but this is not an argument for what some call "situational" ethics -- ethical behavior that may, or may not, differ with circumstances.

Questions

What aspects of the situation (actions by any stakeholder) demonstrate ethically sound behavior and which illustrate unethical behavior?

Sadly, until the Attorneys General pursued Countrywide for consumer fraud, securing an $8.68 Billion settlement for defrauded borrowers, no one acted ethically. Not Countrywide, and in some instances, not the homeowners either, where they acquiesced in the lies.

Analyze how the company's corporate culture that may have helped to minimize the unethical behavior or actually contributed to/caused the unethical behavior.

The corporate culture at Countrywide included a "Friends of Angelo" scheme that gave low interest loans to members of congress. The order of the day was profit, from any action, and the profits were divvied up in the billions.

Analyze how the company's corporate governance (overall guidelines, strategic decisions/actions) may have helped to minimize the unethical behavior or actually contributed to/caused the unethical behavior.

Few situations are as saturated in misconduct as the Countrywide debacle. In short, there was no governance whatsoever. Now that Bank of America bought the company, their guidelines and rules will apply as necessary to wholly alter the previous absence of law or ethics. All new personnel are necessary.

Based on the ethical perspectives (theories of ethical thought presented in the course), what are the key factors that should be addressed or considered in resolving the legal/ethical issues identified in this case (as outlined above)?

This entire episode mandates further oversight, and congress is still examining these issues. The primary lesson here is that self-regulation does not work, where so much money can be made. The only resolution was the loss of millions of homes, and breaking of our banks.

Recommend corrective actions for each of the legal/ethical issues outlined above.

Provide supporting rationale for each recommendations or industry examples of the use of your recommendations as "best practices."

Full disclosure -- retrain brokers and edit the paperwork to ensure all facts are revealed. Consider standard DVD that borrower views with lender, raising all issues clearly

Incomplete, irregular forms -- prohibit anyone from processing blank forms, as in banking.

Pre-qualification -- Require online process with advance written loan amount qualification in writing, as with car buyers.

Misrepresentation -- Prohibit alterations in terms at closing, period. Make it escrow company's responsibility.

Fees -- mandate a Good Faith Estimate, listing all fees and charges in advance, like with auto repair.

Timeliness -- Adhere to schedule, or suffer commission penalty. An ethical lender works in a timely manner, and does his best to close the loan quickly.

Recommend approaches or policies that the company can take to help prevent these issues in the future.

1. Require professional licensing of all broker reps, with an exam, like attorneys.

2. Require professional liability insurance for all broker reps.

3. Establish review processes at all lenders to inspect loan origination documents.

4. Pass criminal bans on steering, and securing loan above buyer's creditworthyness.

5. Monitor secondary market to remove profit and kickbacks from subprime market.

Provide supporting rationale for each recommendations or industry examples of the use of your recommendations as "best practices."

1. Licensing is required for barbers, why not mortgage reps? An exam would improve the professional competence of lenders and this exams could include an ethics section, like the bar exam.

2. Insurance would cover victim's of fraud, when they avoid recovery. MDs and Attys have to be insured, same here.

3. Internal reviews would screen improper loan apps rather than just try and process them.

4. Criminal sanctions would get the industry's attention, and deter fraud.

5. Congress is about to regulate that secondary market for the first time, after it nearly brought the economy down.

References

Michaelson, Adam (2009) "The Foreclosure of America: The Inside Story of the Rise

and Fall of Countrywide Home Loans, the Mortgage Crisis, and the Default of the American Dream," Berkley Publishers

Kirchick, James The Irresponsiblity Of Countrywide, Wall Street Journal, December 6, 2007.

Staff, Countrywide Settles Predatory Lending Charges for $8.68 Billion, Business Week,

October 6, 2008

http://www.consumeraffairs.com/news04/2008/10/countrywide_settlement.html#ixzz0jLd2JXT6

PRNEWSWIRE, Bank of America Agrees to Purchase Countrywide Financial Corp.…[continue]

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