Fair Housing
A Kentucky lender requires minority applicants to provide more documentation than white applicants with similar financial profiles. This practice is:
APermissible for risk management
BIllegal disparate treatment under fair lending laws✓ Correct
CRequired by secondary market guidelines
DPermitted if the lender discloses the practice
Explanation
Requiring more documentation from minority applicants than from similarly situated white applicants is disparate treatment, which violates ECOA, the Fair Housing Act, and the Equal Credit Opportunity Act.
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Key Terms to Know
Fair Housing Act
Federal law prohibiting discrimination in the sale, rental, or financing of housing based on race, color, national origin, religion, sex, disability, and familial status.
SteeringAn illegal practice where a real estate agent directs buyers toward or away from certain neighborhoods based on the buyer's race, religion, national origin, or other protected characteristics.
BlockbustingAn illegal practice of inducing homeowners to sell by claiming that the entry of minority groups will lower property values.
RedliningAn 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.
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