PSI Virginia Real Estate Practice Exam

What is the term for the practice of refusing to lend money in specific areas based on location?

1. Redlining

2. Blockbusting

3. Discrimination

4. Segregation

The correct answer is: Redlining

The term that describes the practice of refusing to lend money in specific areas based on location is known as redlining. This term originated from the practice of lenders drawing red lines on maps around neighborhoods they deemed too risky, often based on the racial or economic demographics of the area. Redlining systematically discriminates against individuals from certain communities, making it difficult for them to access loans or mortgages, which can perpetuate economic inequality and restrict access to home ownership. The concept of redlining is significant as it highlights issues of fair lending and discrimination within the housing market. It is a particularly harmful practice because it can reinforce socioeconomic disparities, hinder community development, and contribute to a cycle of poverty. Understanding redlining is crucial for recognizing its impact on communities and addressing the broader implications of discriminatory lending practices.