FinanceIntermediateAlaska Exam

Under the Community Reinvestment Act (CRA), lenders are required to:

AOffer mortgages at below-market rates to low-income borrowers, though specifics can vary by situation

BMeet the credit needs of all segments of their communities, including low- and moderate-income areasCorrect

CProvide free financial counseling to first-time homebuyers

DCap origination fees on government-backed loans

Why Meet the credit needs of all segments of their communities, including low- and moderate-income areas Is Correct

Answer B: Meet the credit needs of all segments of their communities, including low- and moderate-income areas

The Community Reinvestment Act encourages depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations.

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

Private Mortgage Insurance (PMI)

Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.

Redlining

An 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.

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.