Under the Housing Financial Discrimination Act of 1977 (Holden Act), a California lender refuses to make mortgage loans on properties located in a particular zip code, citing the area's older housing stock and changing demographics. Which legal conclusion best applies?
Correct Answer
C) The lender's policy violates the Holden Act because lending decisions may not be based on neighborhood characteristics such as age of housing or demographic composition
The Holden Act (California Health & Safety Code §35800 et seq.) prohibits financial institutions from discriminating in the provision of mortgage loans based on the characteristics of the neighborhood or geographic area where the property is located. This includes factors such as the racial or ethnic composition of the area, the age of the housing stock, or income levels — a practice historically known as redlining. The Act does not require proof of intentional discrimination; a policy that uses neighborhood characteristics as a basis for lending decisions is prohibited on its face.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
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