Finance
The Community Reinvestment Act (CRA) requires banks to:
AOffer below-market interest rates to all borrowers
BMeet the credit needs of all segments of their communities, including low- and moderate-income areas✓ Correct
CApprove all mortgage applications regardless of creditworthiness
DReport all loans to the CFPB
Explanation
The CRA encourages federally insured depository institutions to meet the credit needs of all segments of their communities, including low- and moderate-income neighborhoods.
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Key Terms to Know
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.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
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.
Math Concepts
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