Sharon Donnelly November 21, 2010 Can you imagine the financial effects the economy would feel if every home owner up and just walked away from their homes, owing more than the definite value of the home and the loan? With the current struggles and rapid down spiral of our economy, many financial services, and institutions are burdened with many homeowners inability to maintain their mortgage financial responsibilities, thus resulting in abrupt abandonment.
The endurance and very essence of our economy and financial systems depend heavily upon homeowners being able to fulfill financial obligations outlined in their mortgage loans. According to Anne Federwisch, “The public seems to have the perception that the financial service sector is more unethical than other areas of business” (http://scu. edu). Unfortunately, the financial service industry is plagued with many ethical issues that affect everyone and the economy.
This paper will describe and discuss the virtual organization company McBride Financial Services, giving background information on the profile of the business and the current moral and ethical issues faced by this financial service company. McBride Financial Services is an established regional mortgage lender service company that is headquartered in Boise, Idaho. The company plans to expand their financial services into parts of Wyoming, Montana, North and South Dakota.
The mission of the company is simply stated as follows, “McBride Financial Service will be the preeminent provider of low cost mortgage services using state-of-the-art technology in the five state areas of Idaho, Montana, Wyoming, North Dakota, and South Dakota. We thank you in supporting our mission! ” The focal points of the company are becoming a profitable company within the first year of operating, leverage technology to minimize costs and maximize efficiencies for customers and the business in applying for and obtaining mortgages.
The services provided by McBride are targeted toward families and individuals, including working professionals, who wish to purchase recreational properties and retirees who are purchasing a primary or secondary residence. Not only will the customers receive efficient and effective financial services, the firm will also provide assistance with the application process. Currently, the application is processed in one business day to the closing of the mortgage loan; and in most cases, the loans are closed within a 10 to 14 day period.
Customers opting to receive pre-approvals, have an advantage because of prior knowledge of their price ranges in terms of affordability of the homes and are able to have the company focus on those loans such conventional, FHA, and VA loans that are more inline with their budget and financial needs. McBride is a One-Stop mortgage provider; offering full credit reports, home inspections, appraisals, and a competitive mortgage at the lowest rate available all for the fixed price of $1,500!!
The success of McBride can be attributed to our ability to offer multiple locations, upscale and gracious office space and having a state-of-the-art, user-friendly website. Applications can be completed online or by coming into one of many offices and working one-on-one with a specialist that will provide superior service with completing the application process. The user-friendly website provides a resourceful and trouble-free application process. Why should customers choose McBride over other financial services?
Its simple because they are able to offer and provide all primary financial services needed to secure a loan for one low price in the least possible amount of time from the start of the application to the closing. Furthermore, the company is responsible for setting up and arranging appraisals and inspections of the all properties in question by a local licensed professional. Presently, thousands s of mortgage lenders operate within the United States (http://www. advantagefinancial. com). The above mentioned highlights have made the company one of the most successful inancial services in the Mid-Western region. There are a few moral and ethical issues that McBride Financial Services must tackle. The foremost ethical issue that is faced by this company is the lack of options for interest rates. An “ARM” is an adjustable rate mortgage which is presents as a major issue. The interest rate on the life of a mortgage can fluctuate by going up or down, based upon the modifications in the marketplace. Having an “ARM”, can place a financial burden on a home owner, if the economy continues to collapse and fall short, mortgage payments will continue to rise.
In addition to ARM, McBride also has a lock-in agreement. A lock-in agreement affords the applicant the opportunity to make an agreement with the mortgage company to set the interest rate at the time of the pending loan application to a fixed rate. However, the problems begin when the interest rates change, and they change all the time. If the interest rate is lower than what is suggested at the time of signing the loan, then the banks will not lower the payment.
If the company prides itself on giving superb services, than offering a lower interest rate when it drops would be morally appropriate. According to Ronald Duska, who holds the Charles Lamont Post Chair of Ethics and the Professions at the American College, there are five identified ethical challenges faced by the financial service industry and they are as follows: self-interest, moral development, moral versus legal behavior, professional duty conflicting with the company demands, and individual responsibilities withering under the difficulty of the client.
If financial services could overcome these dilemmas, consumers would be more likely to accept the financial assistance being offered from their advisor. This would help to diminish that false sense of having a mortgage lender that is looking for a profit versus genuinely helping the customer to achieve the best interest rates and loan possible. Another prominent problem that McBride and other financial services are experiencing is strategic default, which is a major ethical dilemma that is causing havoc to this company.
Owners that can pay the actual amount of the loan are allowing their mortgage payments to default. In 2009, 25% of home owners went into foreclosure. Although our economy is in a recession, this unfortunate circumstance is not solely a factor in this high number of foreclosures. However it is the mere fact that customers not valuing the promise of your mortgage loan resulting in non-payment of their mortgage. This type of domino effect greatly influences not only the homeowner but the mortgage lender as well.
The mortgage lender will lose out of hundreds of thousands of dollars; the owner will not only lose their home but will also carry a stigma of having a home in foreclosure, which will affect the consumer’s credit rating tremendously. Financial service companies rely heavily upon consumers conducting morally reasonable decisions that entail them to pay the exact amount of their loan for the duration of their contract.
There are codes of ethics that apply to mortgage loans, and each state has their own set of ethics that should be both enforced and followed by the consumer and the mortgage lender. McBride will be one of the top financial services, once the code of ethics are applied and understood by all parties involved.
References Federwisch, A. (2009). Ethical Issues in the Financial Services Industry. Retrieved from http://www. scu. edu Ethics in Mortgage Lending. Retrieved from http://www. advantagefinancial. com McBride Financial Services Retrieved from http://ecampus. phoenix. edu