Finance
What does the Home Mortgage Disclosure Act (HMDA) require of most residential mortgage lenders?
AProviding federally standardized loan products to all applicants
BCollecting and reporting data on loan applications and originations by geographic area and borrower characteristics✓ Correct
COffering loans at equal rates to all qualified applicants
DDisclosing annual percentage rates on all advertisements
Explanation
HMDA requires covered lenders to collect and report data on mortgage applications, originations, and purchases by geographic area and borrower demographics, allowing regulators to identify potential redlining and discriminatory patterns.
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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.
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.
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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