Redlining is defined as refusing to make loans or insurance in certain areas that are considered bad risk. Which act prohibits redlining?

• A. Refusing to make loans or insurance in certain areas that are bad risk; HMDA prohibits redlining
• B. Providing loans only in central districts
• C. Marketing only to certain neighborhoods
• D. Offering subsidized insurance in all areas

Answer: (A)

Redlining is about denying loans or insurance in certain areas because of risk, often tied to the neighborhood’s characteristics. The way to curb that practice is through data transparency that reveals where lenders are approving or denying applications by location. HMDA requires lenders to report loan data broken down by geography, which lets regulators see patterns of lending in different neighborhoods. That visibility is what enables enforcement of fair lending rules and helps root out discriminatory practices like redlining. The other options describe discriminatory behaviors themselves rather than the monitoring mechanism that helps prevent them. So the act that serves to prohibit redlining by exposing geographic lending patterns is HMDA.