Fair Housing
Under the Fair Housing Act, a lender who denies a mortgage solely because the property is in a predominantly minority neighborhood is engaging in:
ASound underwriting practice
BRedlining — illegal geographic discrimination based on the neighborhood's racial composition✓ Correct
CPermissible risk-based pricing
DLegal appraisal bias
Explanation
Redlining — refusing to lend in areas based on their racial or ethnic composition — is illegal under the Fair Housing Act and ECOA, constituting illegal geographic discrimination.
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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.
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.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
SteeringAn 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.
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