Finance
Predatory lending practices that Indiana regulators watch for include all of the following EXCEPT:
ALoan flipping — repeatedly refinancing without benefit to the borrower
BCharging above-market interest rates to high-risk borrowers
CRequiring PMI on loans with LTV above 80%✓ Correct
DEquity stripping through excessive fees
Explanation
Requiring PMI on loans with LTV above 80% is a standard, legitimate industry practice that protects lenders. Loan flipping, above-market rates without justification, and equity stripping are considered predatory lending tactics.
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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.
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
Math Concepts
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