Aceable level 7 chapter 5

Redlining

A process by which banks draw lines on a map and refuse to lend money to purchase or improve property within the boundaries.

Community Reinvestment Act

As the name of the Community Reinvestment Act (CRA) suggests, this piece of legislation aims not only at preventing unethical discrimination, but also at reversing the abandonment and decay of residential property. It helps commercial banks and savings associations meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods. Passed in 1977, the Act requires lenders to assist their local communities by participating in community development projects. The Act also says that lenders need to submit an annual statement including public comments about their attempts to help low-income communities. The CRA extended and clarified the long-standing expectation that banks will serve the convenience and needs of their local communities.

Home Mortgage Disclosure Act

Unfortunately, enforcing the prohibition against redlining can be difficult. But to help prevent discrimination in lending, in 1975, Congress passed the Home Mortgage Disclosure Act. This act requires lenders to disclose specific lending information, which HUD then uses to map lending patterns. In essence, lenders must now disclose how many loans they offer to specific communities, as well as the types of loans and the terms of those loans. This allows HUD to spot problematic lending patterns and helps support lawsuits or other disciplinary measures that HUD deems necessary.