Ethical issues - New centry financial corporation - Case Study Example

These decisions prompted the stakeholders of the company to quit thus leading to its bankruptcy. It is notable that the ethical issues associated with New Century Financial Corporation were damaging to various groups of people in the subprime mortgage industry. The groups included mortgagors, investment banks, and mortgage brokers, rating agencies, lenders and investors (Palepu, Srinivasan & Sesia, 2009). The low quality of loans that the company offered affected the Mortgagors (borrowers). Investment banks realized massive losses from the money they had invested by offering New Century Financial Corporation mortgages.

Mortgage brokers also made losses by conducting business with the corporation. Lenders and investors, likewise, realized massive losses due to New Century Financial Corporations misuse of their funds. By 2005, the subprime market was already experiencing advancement both in technology and loan quality. However, New Century Financial Corporations management failed to adapt to these changes. Instead, the companys performance continued to deteriorate due to a poor management. Most of the decisions New Century Financial undertook based on efficiency.

The company ensured that the distribution of its securities to investors was favorable. It also terminated loan applications for efficiency due to the withdrawal of its lenders. The companys decisions and operations were associated with various ethical issues. First, it was unethical for New Century Financial Corporation to lack proper documentation of its operations. Proper documentation would enable the company to keep perfect records. Secondly, the corporation had an ethical issue in the valuation of the loans it was selling.

For instance, the management was unable to account for purchase of its mortgage loan reserves. Next, the loan quality offered by New Century Financial Corporation was an ethical issue. The company