Finance
The Community Reinvestment Act (CRA) requires:
AAll lenders to reduce interest rates for low-income borrowers
BFederally regulated banks to help meet the credit needs of their entire service area including low- and moderate-income communities✓ Correct
CLenders to approve all loan applications from minority applicants
DCommunity banks to merge with larger institutions
Explanation
The CRA requires federally regulated financial institutions to demonstrate that they are serving the credit needs of all segments of their community — including low- and moderate-income neighborhoods — not just more profitable areas.
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Key Terms to Know
Amortization
The 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.
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.
Math Concepts
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