Finance

Under the Community Reinvestment Act (CRA), federally regulated lenders are required to:

AMake loans to all applicants regardless of creditworthiness

BMeet the credit needs of the entire community, including low- and moderate-income areas✓ Correct

CCharge the same interest rate to all borrowers

DOffer FHA loans in all markets where they operate

Explanation

The CRA requires federally insured depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods.

People Also Study

Key Terms to Know

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 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.

Private Mortgage Insurance (PMI)

Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.

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.