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Reaction Paper
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Payday loans and Mortgage (Reaction Paper Sample)

Question 1: Payday loans are an option that some consumers utilize. The industry has been criticized for extremely high interest rates and "predatory lending." Discuss any regulations the lenders must follow (if any), and if more regulation of this industry is necessary, or if the industry provides a necessary service to consumers. Question 2: Read the "Focus on Practice" below and discuss the authors question "As a reaction to problems in the subprime area, lenders tightened lending standards. What effect do you think this had on the housing market?" FOCUS ON PRACTICE New Centry Brings Trouble for Subprime Mortgages As the housing market began to boom at the end of the twentieth century and into the early twenty-first, the market share of subprime mortgages climbed from near 0 percent in 1997 to about 20 percent of mortgage originators in 2006. Several factors combined to fuel the rapid growth of lending to borrowers with tarnished credit, including a low interest rate environment, loose underwriting standards, and innovations in mortgage financing such as “affordability programs” to increase rates of homeownership among lower-income borrowers. Particularly attractive to new home buyers was the hybrid adjustable rate mortgage (ARM), which featured a low introductory interest rate that reset upward after a preset period of time. Interest rates began a steady upward trend beginning in late 2004. In 2006, some $300 billion worth of adjustable ARMs were reset to higher rates. In a market with rising home values, a borrower has the option to refinance the mortgage, using some of the equity created by the home's increasing value to reduce the mortgage payment. But after 2006, home prices started a 3-year slide, so refinancing was not an option for many subprime borrowers. Instead, borrowers in trouble could try to convince their lenders to allow a “short sale”, in which the borrower sells the home for whatever the market will bear, and the lender agrees to accept the proceeds from that sale as settlement for the mortgage debt. For lenders and borrowers alike, foreclosure is the last, worst option. 1. References must be used. The course textbook and Wikipedia will not count as a references. Be aware of bias references. REQUIRED REFERENCES: PRINCIPLES OF MANAGERIAL FINANCE, 6th edition by Lawrence J. Gitman and Chad J. Zutter . Separate the references used in answering each question. 2. It is imperative that the question is answered. Here is an example of Answer to one question. Planning is not useless I do not agree that because of the rapid developments in E-business and E-commerce that planning is useless. Planning is a routine task in the military and civilian environment. The political, economic and social environments around the world, especially in the Middle-east, require military operational planners to develop contingency scenarios to plan future operations and military deployments such as those generated by the Joint Chiefs of Staff prior to Operation Iraqi Freedom (Bowman, 2003). What O'Brien (2004) describes as the scenario approach to planning has already been taking place for many years in the U.S. navy in preparing ships for overseas deployments (Global, 2004). Though the environments are different, both military and private business planning are similar in some aspects and critical for success. Furthermore, O'Briens description of organizational planning, scenario approach and SWOT analysis are similar to military planning. Organizational Planning The organizational planning process is similar to what the U.S. Navy calls the “Fleet Response Plan” for its warships (Global, 2004). The first step of team building entails selection of the shipboard training team members (SBTT) and their five-day training period at the Afloat Training Group (ATG). The second step is the initial assessment of the training and knowledge level of the ship's crew as well as reviewing administrative programs by conducting a Command Assessment of Readiness and Training (CART). The third step is training the crew as required by anticipated deployments to any part of the world in response to a political or economic crisis. The other three steps in the planning process as described by O'Brien (2004) are similar to what the “Fleet Response Plan” entails during the interdeployment training cycle. Finally, an operational plan is conducted for every major evolution onboard the ship. Before the evolution is executed it is thoroughly planned, briefed, executed and debriefed. Scenario approach. The scenario approach is what the SBTT and ATG use to train shipboard crewmembers. What Peter Senge calls virtual world exercises (O'Brien) are scenarios developed to simulate a hostile environment to safely train. During a final environment period, a ship will be in this virtual world for up to a 96 hour period while the ATG assesses the SBTT and crewmembers to determine if the ship is ready to continue the training cycle and deploy with an Aircraft Carrier Battle Group. SWOT analysis The SWOT analysis is also used by the ATG to develop a training syllabus for the ship. During the CART the ATG will inspect and evaluate the ship to determine its strengths and weaknesses. The training syllabus is then developed to schedule training periods and enhanced training opportunities based on observed weaknesses. The threat is not only the anticipated real-world operating environment, but also the threat of poor performance during training and becoming complacent in watch-standing abilities. Conclusion The comparison between the U.S. Navy and the private sector planning process show the many similarities. One reason could be that most senior officers earn their graduate degrees or that many corporate executives have received some type of military training. Not to be omitted is the fact that five of the past six presidents also served in the military or received military training. Planning was not useless when the maximum airspeed of and aircraft was 200 knots. Planning is what has enabled a surface-to-air missile launched by a warship to intercept a warhead from an intercontinental ballistic missile. For the civilian sector, companies have to plan for the future because they need to earn cash (Preston, 2000). References Bowman, S. (2003). Congressional research service. Iraq: Potential for U.S. military operations. (RL31701). Washington, DC: U.S. Government Printing Office. Global (n.d.). Global Retrieved March 27, 2004, from http://www(dot)globalsecurity(dot)org/military/ops/idtc.htm O'Brien, J. (2004). Management information systems. Manageing information technology in the business enterprise. (6th ed.). New York: McGraw Hill Irwin. Preston, R. (2000, July 24). E-business planning must be for the long haul. InternetWeek, 9. source..

Payday loans and Mortgage
Payday loans and Mortgage
Payday loans are small amount of finances that are being lent to people who do not have sufficient resources to rely upon. This group of people mostly takes these loans to take care of their pressing basic needs. The payday loans are seen as short term loans that are charge high interest rates. In many cases these payday lenders use predatory ways that if a borrower fails to pay the loan they then take the goods they had agreed as guarantor. This is a way to seize goods from the borrower and sell them for a profit.
It is then clear from the above definitions that the main aim of the lender is to make more money from the poor who they know very well they will not be able to repay a loan. Therefore, I think it is the role of the government to control the lenders to avoid victimizing the borrower. The payday loans rob people of the chance to become financially secure as the lender never has the interests of the borrower at heart ( HYPERLINK "/s/ref=ntt_athr_dp_sr_1?_encoding=UTF8&field-author=Lawrence%20J.%20Gitman&search-alias=books&sort=relevancerank" Gitman &  HYPERLINK "/s/ref=ntt_athr_dp_sr_2?_encoding=UTF8&field-author=Chad%20J.%20Zutter&search-alias=books&sort=relevancerank" Zutter , 2011). In this regard the lender should try to make the rate of interest to be in line with the interest rate being charged by the other financial institutions.
It is the role of the government to ensure that the consumer interests are taken care of. Therefore, they should regulate the way that the payday loan lenders operate. The government should put a ceiling rate of interest as a guideline to the lenders. Additionally, the government should try to ensure that the lenders partner with the state chartered banks in order to protect the borrowers from exploitation. The banks should also lower the fees they charge when a customer account lack suf...
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