Are subprime loans socially responsible?

If subprime loans had been created to share the American dream with those who might not otherwise be able to participate; then the decline of the economy might not have triggered massive foreclosures, however that is not the case. Subprime loans were created to extract the maximum value out of homeownership (Watkins, 2011). Just knowing this information and the information presented in the two previous blog post causes us to examine two important questions to determine if subprime loans are socially responsible. The first question to consider should be is there a significant racial divide or are subprime loans proportionately distributed?  The next question should be what are the consequences from making these types of loans? First we noted that subprime loans are proportionately sold to African Americans more than any other group if we looked at the rates of subprime loans sold to African Americans with an average income between 60,000 and 90,000, over half approximately 57.3 percent are sold higher interest rate loans. While the white counterparts who are in the same average income range only account for 33.2 percent of the loans at the higher interest rates (Beeman, Glasberg & Casey, 2011). This leads us to ask about the decision makers. As institutions depend on individuals to make these decisions how is it possible that these decision are being made across the board?  Decision makers are tasked to use personal, situational, and environmental knowledge to make an ethical decision (Thiel, Bagdasarov, Harkrider, Johnson, & Mumford, 2012). However knowing that these loans are designed to increase over time it becomes easy to see the motivations for making the loans. The consequences of these types of loans can devastate a household and subprime loans in particular account for almost 50% of foreclosures of all mortgages (Johnson, 2010). However the maker of the loan still got paid, and someone will take over the loan and the lender will eventually be paid, while the borrower has suffered the loss of their home and blows to their credit that was already low to begin with.  When subprime loans are written for the benefit of all responsible parties involved they can indeed be a socially responsible investment, but they should not be entered into without careful consideration and without weighing out all of the options before hand to make sure it is best for all involved.