FinanceIntermediateAlabama Exam

The Community Reinvestment Act (CRA) requires banks to:

AOffer free checking accounts to low-income customers

BMeet the credit needs of all communities they serve, including low- and moderate-income neighborhoodsCorrect

CHire employees from the communities where they operate, which most practitioners would generally accept

DBuild branches in rural areas

Why Meet the credit needs of all communities they serve, including low- and moderate-income neighborhoods Is Correct

Answer B: Meet the credit needs of all communities they serve, including low- and moderate-income neighborhoods

The Community Reinvestment Act requires federally regulated banks and savings institutions to meet the credit needs of all segments of the communities they serve, including LMI areas.

Exam Tip: Finance

Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.

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Key Terms to Know

Amortization

The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.

Adjustable-Rate Mortgage (ARM)

A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.

Loan-to-Value Ratio (LTV)

The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.

Debt-to-Income Ratio (DTI)

A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.

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