A California lender refuses to make mortgage loans on any property in a particular neighborhood because of the racial composition of that neighborhood, without regard to an individual applicant's qualifications. This practice is called:
Correct Answer
B) Redlining
Redlining is a lender's refusal to lend, or to lend on equal terms, in a geographic area because of the racial or ethnic makeup of that area. California's Housing Financial Discrimination Act of 1977, the Holden Act, forbids a financial institution from basing a housing loan decision on conditions, characteristics, or trends in the neighborhood surrounding the property unless it can show that considering them was necessary in that case to avoid an unsafe and unsound business practice (Health and Safety Code Section 35810). The same conduct violates the federal Fair Housing Act (42 U.S.C. Section 3605). What identifies redlining is that the decision turns on the area rather than on the borrower.
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Related Concepts
An as-is clause in a real estate contract states that the buyer accepts the property in its current condition without requiring the seller to make any repairs. However, an as-is sale does NOT eliminate the seller's obligation to disclose known defects.
Asbestos disclosure involves informing buyers about the presence of asbestos-containing materials (ACMs) in a property. Asbestos was commonly used in construction materials before 1980 and poses health risks when fibers become airborne.
Violating fair housing laws can lead to significant penalties, including fines, civil liability, and professional discipline.
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