California Real Estate Practice Exam

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Which of the following is not considered by a lender when approving a mortgage loan application?

Income of the borrower
Credit history of the borrower
The ethnic background of the borrower
Value of the collateral

The correct answer is: The ethnic background of the borrower

The correct answer is the ethnic background of the borrower. In the mortgage loan approval process, lenders assess various financial factors to evaluate the borrower's ability to repay the loan. Key elements include the borrower's income, credit history, and the value of the collateral, such as the property being financed. Lenders do not consider a borrower's ethnic background as it is discriminatory and against fair lending laws, such as the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act. These laws promote equal treatment regardless of race, color, national origin, sex, marital status, age, or reliance on public assistance, ensuring that loan decisions are based solely on financial qualifications.