Rae Wong Beyond Integrity 3rd Ed Zondervan 2012 ISBN 978031

Rae & Wong, Beyond Integrity, 3rd Ed. (Zondervan) 2012, ISBN: 9780310291107 Review Case Study 11.2 (pg. 483 of the text) concerning the subprime mortgage meltdown and Washington Mutual’s role in the crash. Then access this story: http://www.huffingtonpost.com/2009/12/21/at-long-beach-mortgage-a_n_399295.html What went wrong at Washington Mutual and Long Beach Mortgage that enabled employees of both companies to engage in such widespread fraud? The well-written answer for the selected Case will involve some discussion of the following points: •While Washington Mutual (“WaMu”) was essentially responding to government pressure to enable more widespread home ownership… The only way to do so was to set aside rigid adherence to usual and customary credit underwriting practices such that more people could qualify. Then lenders began introducing lending products that looked quite attractive – with teaser rates which adjusted a year or two into the life of the loan Accompanied by negative amortization by which the loan amount due got bigger over time, despite faithful payment on note terms. Brokers encouraged refinances to avoid rate adjustment. Sales prices and appraisals enable frequently refinances, often with cash out to the borrower – thus the characterization of one’s home as an ATM machine from which cash could be obtained. •Then WaMu sold off its loans – ordinarily a reputable practice which re-capitalizes lenders. •But with risky loans and pressure on loan officers to create more and more risky loans, the secondary market became overwhelmed with loans in default. •The student should then identify what, if anything, was unethical in these practices.

Solution

After reading the whole artical I can say that this whole act is an unethical Practice.There are some evidence like- Kosch was given 15 minutes per file & some of the original files were missing pages.This showed evidence of fraud.

She said there are some blacksheep of the company who created these problems.But she did not think hard worker and honest worker.

Bad loans ultimately led to the collapse of long Beach Mortagage and its owner ,whashington Mutual is the biggest bank failure in history.

If we see inside of it many of its lending practices were common among subprime loan campanies .so it show that it was a planned and narrative of the financial crises.

with all proof and evidence can say that management practices may have been largely responsible for the crisis because they enabled fraud to run rampant.

So at the end I can say that the whole act is an unethical act because she did not think about her loyal employees but just think about herself.