Apparent from the case is the fact that the United States government and their financial institutions have been working to make the dream of owning a home become a reality. In essence, the financial institutions have been continually adjusting their interest rates and easing access to loans in a bid to attract as many customers as possible. The American government, on the other hand, provide significant tax incentives in an effort to foster the achievement of this dream. Being the Senior Vice President for Mortgage Lending Mary Taggert has convinced the Citywide bank to extend its services by engaging in subprime home lending market. The above implies that the bank will have to incur the risk of offering loans to clients that have a lower credit score than the prime customers. In essence, this poses a dilemma to the Citywide bank on whether to engage in subprime home lending market or not.
People involved in this case are the Citywide bank shareholders particularly the Vice President for Mortgage Lending Mary Taggert, the subprime customers, and the government.
- Citywide being a conservative banking institution has been focusing on lending loans to customers for commercial purposes particularly small businesses and low-risk homes loans. Considering that these loans can be packaged and sold through the established government agencies, the risk to the bank is at a minimum.
- Choosing to engage in subprime home lending market will possibly expose the bank to the anticipated risk if the customers fail to maintain the property.
- The subprime home lending market will act as a competitive advantage subsequent to its success.
- The down payments for home loans is progressively dropping owing the competition between lending institutions
