National Real Estate Exam (PSI)Practice of Real EstateMedium
A mortgage lender consistently denies loan applications and avoids marketing services in neighborhoods with predominantly minority populations, regardless of applicants' creditworthiness. This practice is best described as:
- ABlockbusting
- BRestrictive covenanting
- CSteering
- DRedlining
Show answer & explanationAnswer & explanation
Correct answer: D. Redlining
Redlining is the illegal practice of denying or limiting financial services, such as mortgages or insurance, to residents of certain areas based on race or ethnicity rather than individual creditworthiness.
Why the other options are wrong
- A. Blockbusting involves inducing panic selling by suggesting minority move-ins will lower values.
- B. Restrictive covenants are private agreements limiting property use, not lending practices.
- C. Steering involves directing buyers toward or away from areas based on protected class, typically by agents, not lenders.
Redlining
An illegal lending practice of denying mortgages or insurance to residents of certain areas based on racial or ethnic composition rather than creditworthiness.
- Named for maps once used to outline high-risk minority areas
- Violates the Fair Housing Act and Equal Credit Opportunity Act
- Applies to lenders and insurers, not just real estate agents
Memory trick: Red line drawn around the neighborhood, not the numbers.