Fair HousingIntermediateCalifornia Exam

Redlining in real estate refers to:

ADrawing property boundary lines on a map, as defined under the Fair Employment and Housing Act

BRefusing to make loans or provide insurance in certain neighborhoods based on racial or ethnic compositionCorrect

CIncreasing rents in gentrifying neighborhoods, consistent with federal Fair Housing Act protections

DMarking properties that are in flood zones, per standard fair housing compliance practice

Why Refusing to make loans or provide insurance in certain neighborhoods based on racial or ethnic composition Is Correct

Answer B: Refusing to make loans or provide insurance in certain neighborhoods based on racial or ethnic composition

Redlining is the discriminatory practice of refusing to lend money or provide insurance in certain geographic areas based on the racial or ethnic makeup of those neighborhoods, regardless of individual creditworthiness. Redlining violates the Fair Housing Act, the Equal Credit Opportunity Act, and the Community Reinvestment Act.

Exam Tip: Fair Housing

Fair Housing questions test both federal (Fair Housing Act of 1968) and state-level protected classes. The federal protected classes are race, color, religion, national origin, sex, familial status, and disability. Many states add additional protections.

Key Fair Housing Terms in This Question

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.

Steering

An 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.

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.

People Also Study

Key Terms to Know

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.

Steering

An 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.

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.

Proration

The division of ongoing property expenses (taxes, HOA dues, rents) between buyer and seller at closing based on their respective days of ownership.