Finance
Under the Home Mortgage Disclosure Act (HMDA), a West Virginia lender must report data including the race, sex, and income of mortgage applicants. The primary purpose is to:
AAllow lenders to screen applicants by protected class
BEnable government monitoring and public scrutiny of lending patterns for fair lending compliance✓ Correct
CSet interest rates based on borrower demographics
DEstablish a national database of all property owners
Explanation
HMDA data allows regulators, community groups, and the public to monitor mortgage lending patterns, identify potential disparities in lending across demographic groups, and assess fair lending compliance. The data does not allow lenders to make lending decisions based on protected characteristics.
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Key Terms to Know
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-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
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.
Math Concepts
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