Leasing License Practice Exam

What is a characteristic of the practice known as redlining?

1. Providing equal loan terms to all applicants

2. Discriminatory denial of mortgage loans to specific geographic areas

3. Encouraging diverse housing developments

4. Promoting home ownership regardless of income

The correct answer is: Discriminatory denial of mortgage loans to specific geographic areas

The practice of redlining is characterized by the discriminatory denial of mortgage loans based on specific geographic areas, often targeting neighborhoods inhabited by racial and ethnic minorities. This practice systematically denies individuals and families in these areas access to financial services, such as loans or home insurance, effectively segregating communities and reinforcing socioeconomic disparities. Redlining emerged from policies enacted in the 1930s that categorized neighborhoods into risk levels for lenders. Areas marked as high risk, often where people of color lived, were outlined in red, hence the term "redlining." These neighborhoods faced heightened scrutiny and were frequently overlooked for investment. This context illustrates why the other options do not align with the essence of redlining. Providing equal loan terms to all applicants would counteract the very principle of redlining, which is rooted in discrimination. Encouraging diverse housing developments and promoting home ownership regardless of income would both serve to challenge the systemic inequities perpetuated by practices like redlining, making them inconsistent with the nature of the practice itself.