What is the practice of banks and mortgage lenders identifying high-risk areas (usually low-income or minority neighborhoods) and either refusing mortgages to applicants from those neighborhoods or offering loans at prohibitively high rates?

Question

Kieran Larson

Business

14 March, 05:54

What is the practice of banks and mortgage lenders identifying high-risk areas (usually low-income or minority neighborhoods) and either refusing mortgages to applicants from those neighborhoods or offering loans at prohibitively high rates?

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Answers (1)

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Carley · Answer 1

redlining

Explanation:

Redlining is an illegal banking practice that focuses on neighborhoods that are mostly inhabited by minorities. The term redlining itself comes from the practice of marking neighborhoods on city maps with red lines to represent them as dangerous both for banking purposes and high crime rates.

Banks cannot directly deny a credit based on where you live, but they can charge very high interest rates that make them very difficult to pay, or simply ask for a lot of paperwork and more requirements than usual.