Final answer:
The legal, non-discriminatory basis for denying a mortgage loan application can be because of the lack of down payment, high debt-to-income ratio, or a poor credit history. However, denying a loan based on the location of a neighborhood primarily occupied by minorities constitutes redlining and is discriminatory.
Step-by-step explanation:
All but which of the following may serve as a legal, non-discriminatory basis for denying a mortgage loan application? The options provided are that the consumer has no cash for a down payment, the loan applicant's debt-to-income ratio is 56%, the consumer is purchasing a home located in a neighborhood primarily occupied by minorities, and the loan applicant has a credit score of 530 and a history of delinquencies on previous loans. The legal, non-discriminatory reasons for denying a mortgage can include the lack of cash for a down payment, a high debt-to-income ratio, and a poor credit history. However, denying a loan based on the location of the home in a neighborhood primarily occupied by minorities is an example of redlining, a discriminatory practice.
Several policies and laws, like the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA), protect against discriminatory lending practices, ensuring that mortgage loan decisions are made based on legitimate financial factors rather than race, ethnicity, or other protected characteristics. It's important that financial institutions avoid practices that led to historic discriminatory mortgage lending and instead adhere to fair lending laws.