Finance
The Community Reinvestment Act (CRA) requires banks to:
AOffer the lowest interest rates to all borrowers
BMeet the credit needs of all segments of the communities they serve, including low-income areas✓ Correct
CFund a minimum percentage of FHA loans
DMaintain reserves for mortgage insurance
Explanation
The CRA requires federally-insured depository institutions to help meet the credit needs of their entire service area, 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.
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.
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.
Math Concepts
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