Finance
The Community Reinvestment Act (CRA) requires banks to:
AOffer all borrowers the same interest rate
BMeet the credit needs of all segments of the communities they serve, including low- and moderate-income areas✓ Correct
CLend only within their home state
DReport all loan applications to the NMREC
Explanation
The CRA requires federally insured banks and savings institutions to serve the credit needs of the entire community, including low- and moderate-income neighborhoods, helping combat redlining.
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Key Terms to Know
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.
AmortizationThe 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.
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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