Moral Hazard and the Mortgage Industry Would you be more willing to sky dive if you knew you were invincible? Of course you would, who wouldn’t take that amazing trip if you knew you would live to tell about it. When there is little risk or threat of recourse, most would be more willing to take great risks, for the thrill, the riches, or just because they can. These situations can describe the theory of moral hazards. A moral hazard can be described as, when people with insurance take greater
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"It's a big problem coming off the housing bubble," says Cary Sternberg, who advises seniors on housing issues in The Villages, a Florida retirement community. "A growing number of seniors are struggling with what to do about their home and their mortgage and their retirement." The baby boom generation was already facing a retirement crunch: Over the past two decades, employers have largely eliminated traditional pensions, forcing workers to manage their retirement savings. Many boomers didn't save
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Class notes from April 14, 2011 This presents three different sample outlines for the Preliminary Research Report, using different research topics. I have edited the outlines somewhat, mostly by re-arranging ideas into the appropriate section (for example, moving some questions out of III and moving them into III or vice versa). After the examples I present a brief review of style/voice—in other words, how to write up your information in each section, by demonstrating how you might begin each
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investors trusted credit rating agencies like Moody’s for an objective and independent rating, and Moody’s completely broke that trust and downgraded its ratings on numerous mortgage-backed bonds. The stakeholders that benefited from Moody’s actions were the low-income homeowners who traditionally did not qualify to get a mortgage because
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Zachary Tyler Analysis #1 February 25, 2016 32984 Micro Econ Online “National home price gains accelerate, Case-Shiller shows” by Andrew Khouri, LA Times, February 23, 2016 http://www.latimes.com/business/la-fi-la-case-shiller-20160223-story.html Summary: This article is about the incline in housing prices, despite the concern over the economy. The economy today hasn’t looked it’s best. But, the fact that we are seeing home prices rising is a good sign. This is because there
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organization, business or nonprofit needs guidance and leadership. Thus, in order for social responsibility to accomplish goals and fulfill its mission or by setting up plans, leadership is a requirement (Cohen, 2009). As noted by Gilbert (2010), “some mortgage lenders automated the process to the degree that approval to grant an individual loan was computerized” (p.92); thus, this is one of the examples of illustrating the unethical decisions of granting subprime loans which is by having applications through
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borrowing has been cited as a contributing factor to the subprime mortgage crisis. 3 、High-risk mortgage loans and lending /borrowing practices Lenders began to offer more loans to higher-risk borrowers. The risk premium required by lenders to offer a subprime loan declined. Lenders have offered increasingly risky loan options. Mortgage brokers, while profiting from the home loan boom, did not examine whether borrowers could repay. Mortgage fraud by borrowers increased. 4、Securitization practices
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Giant Pool of Money In this radio story about the events leading up to the subprime mortgage crisis, it’s clearly demonstrated that a few psychological biases and heuristics were present and played important roles in forming the crisis. The most critical ones I’ve identified are the confirmation bias and the social proof phenomenon in the development of the crisis. Confirmation Bias Mainly two types of confirmation bias were observed in the subprime crisis: the confirmation trap as well as anchoring
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The recent subprime mortgage crisis in the United States had a devastating impact not only on the economy of the United States, but also on an international level. The only way that many of those who were involved can accept the crisis and their losses is to be able to put someone at fault, which poses the question, who is to blame? This question cannot be answered simply, and involves many complications which have been researched, examined and debated over the years to try to come up with some
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patterns and unsound lending practices. Banks were lending with less documentation and a smaller required down payment, bringing homeowners perilously close to 100% loan-to-value ratios. Another cause for concern was the complex mortgage-backed securities and subprime mortgages of Fannie Mae and Freddie Mac. The last interesting argument for the cause of the bubble is housing starts and land-use regulations, which I want to discuss further. THE HOUSING BUBBLE In assessing the causes of the housing
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