Fair Housing

A Nevada lender offers a prime rate loan to white applicants and automatically offers subprime rates to Hispanic applicants with identical credit profiles. This is an example of:

ALegal risk-based pricing

BReverse redlining and discriminatory lending based on national origin, violating ECOA and the Fair Housing Act✓ Correct

CLegal market segmentation

DPermitted underwriting discretion

Explanation

Offering different loan terms based on race or national origin to applicants with identical qualifications is discriminatory lending (reverse redlining/predatory lending). This violates the Equal Credit Opportunity Act and the Fair Housing Act and has been the basis of major enforcement actions against Nevada lenders.

People Also Study

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.

Redlining

An 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.

Steering

An 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.

Discount Points

Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.