Predatory Lending
The topic and context of your essay must be clearly established at the beginning of the essay.
You must choose from one of the following topics for your essay:
Predatory Lending
Dodd-Frank Act
Volcker Rule
The Bailout of AIG
The Collapse of Lehman Brothers
TARP
The Great Recession Unemployment
The Housing Bubble
How the Credit Rating Agencies Contributed to the Financial Crisis
Where Did the Bank Regulators Go Wrong?
What Happened To Bear Stearns?
Fannie Mae & Freddie Mac
The Auto Industry Bailout
What Happened to Wachovia and WAMU?
American Recovery and Reinvestment Act (ARRA)
Please follow the instructions listed in the Final Exam Essay Details to help you construct your essay.
(PLEASE REMEMBER: BE MINDFUL OF QUOTATION MARKS AND REFERENCE. IF YOU COPY AND PASTE A TEXT OR PARAPHRASE A SOURCE USE QUOTATION MARKS AND LEAVE A REFERENCE THAT IDENTIFIES THE SOURCE.)
Please complete your essay in a MS Word document and upload it here - follow the instructions in this guide (this guide is also listed under Additional Resources).
Your essay will be graded on the following criteria:
Proper formatting
Topic
Thesis statement(s)
Context (Subject-specific, economic theories/models/tools/terminology and concepts if they are included in your research or your paper)
Discussion and conclusion
You must provide a thesis statement.
You will prepare a 3 – 4 page(s) essay one of the listed topics. Your essay should include the following:
· Title Page (this is not included in the 3 to 4 pages count required)
· References/Bibliography (this is not included in the 3 to 4 pages count required)
· APA style format (12-point Times New Roman, 1 inch margins double-spaced),
In your essay, make sure you follow this structure for your essay sections.
Introduction
· This is where you introduce the topic you’re discussing in your essay and briefly summarize the points you’ll make in the paragraphs that follow.
· This is also where you state your thesis. Your thesis statement is the most important part of your essay because it’s the point you’re making. It needs to take a clear stance and shouldn’t include hedging language that undermines that stance like “seems to” or “possibly could.”
Main body
· Decide on the most logical order of your paragraphs - this might be important, chronology or causation, but the basic flow should be simple and clear.
· Each paragraph should clearly provide information that addresses the thesis statement itself - they should make sense one after the other and provide a summary of your topic.
· Be specific, not general. The more detail you can bring in, the more expert you will sound and the more persuasive your argument will be
Conclusion
· In your essay’s conclusion paragraph, you summarize the points you made and bring your essay to its logical conclusion.
· Because your reader is now familiar with your thesis, the summary in your conclusion paragraph can be more direct and conclusive than the one in your intro paragraph.
· Also, you can give your opinion
Bibliography/References
· List the all books / articles / data, etc. you read while researching information on your topic
Please use your own language rather than quoting extensively. Paraphrase: if you can say something in your own words, you are more likely to understand and retain it and it will let me know if you were learning something during the semester. When you do quote, make sure that you “cite” the information.
Predatory Lending
Student’s Name
Institution
Course Number and Name
Instructor’s Name
Date
Predatory Lending
At one time or the other, business entrepreneurs need to borrow money from lending institutions for several reasons. Some of the fundamental reasons businesses borrow include staying ahead of the competition, boosting working capital, and improving credit rating, among others (Hilton-Baird Financial Solutions, 2021). In ideal situations, lenders should cultivate an environment that enables borrowers to service loans without undue encumbrances. However, that is not usually the case since some lenders engage in fraudulent and unfair practices that jeopardize borrowers’ ability to repay debts for their own gain. The most common predatory lending practices include loan churning, prepayment penalties, and subprime loans, which are put in check by such legal protections as the Equal Credit Opportunity Act (ECOA) and the Home Ownership and Equity Protection Act (HOEPA).
Predatory Lending Practices
Loan Churning
Loan churning refers to situations where lenders force borrowers into an unending loan cycle that constrains them to pay fees and interest constantly. More often than not, the continued payment does not substantially reduce the principal amount of the loan borrowers owe (Fay, 2023). Loan churning usually happens after a lender offers borrowers a loan they cannot afford. When the borrowers fail to service the loan on time, the lender offers a new loan that entails a new set of fees and interest. They do this knowing that borrowers who are already under the strain of failing to repay the first loan will agree to the new proposition. In the end, borrowers end up paying much more than they would have for the initial loan. As such, consumers with a poor credit history must be on guard to avoid such exploitation.
Prepayment Penalties
Prepayment penalties are the fees lenders impose on borrowers who repay their loans before the due date. Sometimes, refinancing borrowers resolve to repay existing loans before the appointed time to take advantage of more affordable interest rates (Fay, 2023). The penalties also apply when borrowers pay off large amounts of the mortgage at once (Consumer Financial Protection Bureau, 2020). Since paying before the due date deprives lenders of the interest they would earn if the loan runs its full course, they impose penalties on borrowers to discourage the inclination. There are no fixed prepayment penalties, and they vary from lender to lender, with most charging 2% of the amount borrowed. One way of avoiding prepayment penalties is to ask for the details revolving around the length of the repayment period and the amount of the penalty.
Subprime Loans
The other common predatory lending practice is subprime loans. They apply to borrowers with a poor credit history whose probability of defaulting is considerably high. Since the general perception of subprime borrowers is that they are riskier than prime borrowers, lenders charge a premium to co...