A buyer's mortgage application is denied due to a high crime rate in the area. This situation is an example of?

The situation described illustrates the concept of redlining by the lender. Redlining refers to the practice of denying or limiting services, such as mortgages, to residents of certain areas based on the demographic or socioeconomic conditions of those areas, rather than the individual qualifications of the applicants. In this case, the lender’s decision is influenced by the high crime rate in the area, which may exacerbate concerns about property values and neighborhood stability.

Redlining is considered discriminatory and often targets areas predominantly inhabited by minorities or economically disadvantaged populations. It has historical roots in policies that systematically marginalized certain communities, making it a significant issue in discussions about fair housing and lending practices.

Understanding redlining is crucial, especially in recognizing how external factors, like crime rates, can lead to discriminatory lending decisions that affect access to housing finance for buyers. This distinction also emphasizes the importance of evaluating the fairness and legality of lending practices within the context of equal housing opportunities.