Illinois Leasing Agent Practice Exam

What is the term for refusing a loan based on the racial or ethnic makeup of a neighborhood?

1. Blockbusting

2. Steering

3. Redlining

4. Discrimination

The correct answer is: Redlining

The term for refusing a loan based on the racial or ethnic makeup of a neighborhood is redlining. This practice involves denying financial services such as loans or insurance to residents in certain geographic areas, which often correspond with neighborhoods that are predominantly populated by specific racial or ethnic groups. It is typically justified by the lender's perception of risk, but in reality, it reflects systemic discrimination and has contributed to long-standing disparities in wealth and opportunity. Redlining was made illegal by the Fair Housing Act of 1968, as it perpetuated segregation and prevented individuals from achieving homeownership in areas that could improve their socioeconomic status. This term specifically highlights the geographical discrimination that target minority communities, contrasting it with other concepts like blockbusting, which deals with manipulating homeowners to sell their properties based on changing demographics, or steering, which refers to directing clients towards or away from certain neighborhoods based on race or ethnicity. Discrimination is a broader term that encompasses various unfair treatment practices, but redlining specifically identifies the discriminatory practice connected to loan refusals based on neighborhood demographics.