Eligible for loans with higher interest rates

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Reference no: EM132585725

Our reading on risk, return, and interest rates suggests that individuals with poor or no credit, and lower incomes should only be eligible for loans with higher interest rates, if a loan is even an option. However, most in the US do not have sufficient savings to purchase a home without a mortgage, and many would need a mortgage with a low or no down-payment. Moreover, housing prices in many markets makes purchasing a home a distant dream for many without government intervening to permit or encourage subprime lending. Discuss competing principles of responsible lending as well as social equity regarding subprime mortgages. Issues to be considered (1) should they be offered? (2) is there risk to the borrower, the lender, and the economy, and if so what are they? (3) are there equitable issues which outweigh those risks? If so what are they? (4) are there other solutions, and if so what are they?

Reference no: EM132585725

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