Finance
Under the Community Reinvestment Act (CRA), banks are required to:
AMake loans only in their local community
BMeet the credit needs of the communities they serve, including low- and moderate-income areas✓ Correct
COffer below-market interest rates to first-time buyers
DPartner with HUD on all residential loans
Explanation
The CRA requires federally insured banks and thrifts to help meet the credit needs of all segments of their communities, including low- and moderate-income neighborhoods, in a manner consistent with safe and sound banking.
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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.
AmortizationThe 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.
Math Concepts
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