Finance
The Community Reinvestment Act (CRA) requires federally regulated financial institutions to:
AReserve 10% of profits for affordable housing
BMeet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods✓ Correct
CFinance only properties within 10 miles of their branch locations
DProvide free mortgages to first-time buyers
Explanation
The CRA encourages banks and savings institutions to help meet the credit needs of all segments of their communities, including low- and moderate-income areas, where they are chartered to do business.
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
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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