Fair Housing
A lender in Ohio charges higher interest rates to minority applicants with the same credit profile as white applicants. This is an example of:
ALegal risk-based pricing
BIllegal discriminatory pricing in violation of ECOA and the FHA✓ Correct
CStandard market practice
DLegal variable pricing based on loan amount
Explanation
Charging higher rates to borrowers of a protected class with the same creditworthiness as others is illegal discrimination under both ECOA (which prohibits credit discrimination) and the FHA.
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Key Terms to Know
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.
RedliningAn 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.
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.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Math Concepts
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