Failure Analysis and Change Strategy

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Failure Analysis and Change Strategy LDR531 September 2, 2013 Failure Analysis and Change Strategy Failure and Success Indicators One of the causes of the economic downturn that the United States experienced was individuals defaulting on mortgage loans that they either could not afford or had little intention of actually paying for in the first place. However, the reason they were able to secure these loans in the first place was because of banks like Countrywide decided to approve everyone they deemed willing to make a mortgage payment, regardless of their credit history. In fact, the former co-founder and CEO, Angelo Mozilo, even described his company’s loan approval process as “arduous […] and cumbersome,” especially where the manual approval process was concerned (Englund, 2008). The truly disturbing thought process which should have portended failure was that Mozilo states that many people are approved through the manual process because the “human underwriter, has analyzed non-traditional factors such as the borrower’s rent and utility payment history” (Englund, 2008), but he wants to do away with the human underwriters in favor of an entirely automated system that would have to have inherently lower standards for approval. Ultimately, what caused Mozilo’s, and subsequently Countrywide’s downfall can be attributed to greed and other unethical behaviors. Countrywide serviced more than $1.5 trillion dollars in home loans (Englund, 2008) and Mozilo was trying to increase that, which led to bad loans and their eventual downfall. JPMorgan Chase, on the other hand, has been a steady presence in the banking and loan industry, with very little issues arising from the mortgage debacle that plagued many other banks. This is most likely because they are dedicated to being a bastion of corporate responsibility, always providing an example of how a bank should

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