Finance
A NC lender who uses 'redlining' in mortgage lending decisions is guilty of:
AAcceptable geographic risk management
BDiscriminatory lending practices violating the Fair Housing Act, ECOA, and the Community Reinvestment Act✓ Correct
CA violation of TILA only
DA RESPA violation only
Explanation
Redlining — refusing to lend in neighborhoods based on racial composition — violates the Fair Housing Act, ECOA, the Community Reinvestment Act, and may violate the Home Mortgage Disclosure Act.
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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.
Fair Housing ActFederal law prohibiting discrimination in the sale, rental, or financing of housing based on race, color, national origin, religion, sex, disability, and familial status.
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.
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.
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