Fair Housing
Disparate treatment occurs when a lender offers different interest rates to borrowers of different races with identical financial profiles. This is an example of:
ASound risk-based pricing
BIllegal racial discrimination in lending✓ Correct
CPermissible market segmentation
DCommunity Reinvestment Act compliance
Explanation
Offering different loan terms based on race — even when borrowers are identically qualified — constitutes illegal racial discrimination under ECOA and the Fair Housing Act.
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Key Terms to Know
Fair Housing Act
Federal law prohibiting discrimination in the sale, rental, or financing of housing based on race, color, national origin, religion, sex, disability, and familial status.
RedliningAn illegal practice where lenders or insurers deny services or charge higher rates in certain neighborhoods based on the racial or ethnic composition of those areas.
SteeringAn illegal practice where a real estate agent directs buyers toward or away from certain neighborhoods based on the buyer's race, religion, national origin, or other protected characteristics.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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