Redlining is best described as refusing to make loans or issue insurance in certain areas.

• A. True
• B. False
• C. Only if the area is rural
• D. Only in commercial real estate

Answer: (A)

Redlining means denying or limiting access to financial services in a specific neighborhood because of the area's characteristics, especially its racial or ethnic makeup. Historically, lenders would mark areas on maps to indicate they wouldn’t offer mortgages or other insurance there, regardless of an individual’s credit or qualifications. That’s exactly what the statement is describing, so it’s true. This practice led to disinvestment in the affected communities and is illegal under fair housing and fair lending laws. In contrast, legitimate underwriting focuses on the individual borrower’s risk, not on where they live.