Finance

The federal 'Community Reinvestment Act' (CRA) requires:

AA. Banks to make loans at below-market rates

BB. Banks to help meet the credit needs of the communities they serve, including low- and moderate-income neighborhoods, where they take deposits✓ Correct

CC. All lenders to offer FHA loans

DD. Banks to disclose all loan denials to the CFPB

Explanation

The Community Reinvestment Act (CRA) requires federally insured banks and thrift institutions to help meet the credit needs of all segments of their communities, including low- and moderate-income areas. CRA performance is evaluated during bank examinations.

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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.

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.

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.

Pre-Approval

A lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.