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

Which act requires lenders to participate in community development projects?

1. Fair Housing Act

2. Community Reinvestment Act

3. Home Mortgage Disclosure Act

4. Equal Credit Opportunity Act

The correct answer is: Community Reinvestment Act

The Community Reinvestment Act is the correct choice because it was designed to encourage financial institutions to help meet the credit needs of the communities in which they serve, particularly low- and moderate-income neighborhoods. This act requires lenders to participate in community development projects, ensuring that they provide fair access to credit and banking services to underserved areas. By mandating that banks and other lenders be responsive to community needs, the act aims to combat discriminatory lending practices and ensure that all communities have equitable access to financial resources. This involvement can include lending for housing, community development, and economic revitalization efforts, helping to foster sustainable communities and improve overall quality of life. In contrast, the Fair Housing Act addresses housing discrimination, the Home Mortgage Disclosure Act requires lenders to disclose information about mortgage lending, and the Equal Credit Opportunity Act prohibits discriminatory lending practices but does not specifically mandate participation in community development projects. Each of these acts serves important purposes in the realm of fair lending and housing, but only the Community Reinvestment Act directly obligates lenders to engage in activities that support community development.