What illegal practice involves refusing mortgage financing based on geographical location?

Redlining is an illegal practice where lenders refuse mortgage financing or impose harsher lending terms based solely on the geographical location of a potential borrower’s property. This practice disproportionately affects neighborhoods predominantly inhabited by minorities or low-income families, perpetuating systemic inequality and discrimination in housing and lending.

The significance of redlining lies in its historical context and lasting implications on community development. Areas that were redlined often suffer from a lack of investment, access to quality services, and homeownership opportunities, leading to long-term socioeconomic disadvantages for the residents.

In contrast, steering refers to guiding prospective buyers toward or away from certain neighborhoods based on their race, which is a different discriminatory practice. Fair lending involves regulations and practices that promote equitable access to credit without discrimination. Predatory lending typically addresses unjust practices by lenders, often aimed at exploiting borrowers through high-interest loans and unfavorable terms, rather than outright refusal of financing based on location. Thus, redlining specifically targets the act of denying financing based on geographical factors, making it the correct choice.