A lender uses a facially neutral policy that screens out applicants from one protected group at a much higher rate without a sufficient business justification. What is this called?
Correct Answer
A) Disparate impact
Disparate impact is correct because the facts match a neutral-seeming policy that has an unjustified discriminatory effect on members of a protected group. That is the best description of the relationship, right, or legal concept tested here.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Predatory lending refers to unfair, deceptive, or abusive lending practices that impose unjustified terms on borrowers, often targeting vulnerable populations. It includes practices like excessive fees, inflated appraisals, and unnecessary refinancing.
RESPA is a federal law that requires lenders to provide borrowers with information about settlement costs, prohibits kickbacks and referral fees, and limits escrow account deposits. It applies to federally related mortgage loans.
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
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