Fair Housing

Redlining by lenders involves denying loans or offering inferior terms specifically because:

AThe borrower has a poor credit history

BThe property is located in a neighborhood characterized by racial or ethnic minority residents✓ Correct

CThe loan amount is too small to be profitable

DThe property type does not qualify for conventional financing

Explanation

Redlining is the discriminatory practice of refusing to lend or provide financial services in certain geographic areas based on the racial or ethnic composition of those areas, regardless of individual creditworthiness. It violates ECOA, the Fair Housing Act, and the CRA.

People Also Study

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.

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.

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.

Pre-Approval

A lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.