Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What is the term for a lender refusing to make loans based solely on the geographic location of the property?

1. Redlining

2. Predatory Lending

3. Credit Discrimination

4. Loan Steering

The correct answer is: Redlining

The term for a lender refusing to make loans based solely on the geographic location of the property is known as redlining. This practice is named after the red ink that was often used on maps to delineate areas that lenders considered too risky for investment, often correlating with neighborhoods predominantly inhabited by minority groups. Redlining can perpetuate cycles of poverty and deny equitable access to housing and financial services based on location rather than the individual borrower’s creditworthiness or ability to repay. While the other terms have specific connotations in the realm of lending and real estate, they do not specifically refer to the discriminatory practice based on geographical location. Predatory lending refers to abusive loan practices that are designed to benefit the lender, credit discrimination encompasses unfair treatment based on various factors including race or gender, and loan steering involves directing borrowers to certain loan products that may not be in their best interest. These terms capture different aspects of unethical lending practices, but redlining specifically identifies the issue of geographic bias in lending decisions.