Final answer:
The illegal basis for denying a mortgage loan application among the given options is a: The consumer is purchasing a home located in a neighborhood primarily occupied by minorities, as it represents a discriminatory practice known as redlining. Options b, c, and d are lawful non-discriminatory financial reasons to deny a loan.
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 correct answer is a: The consumer is purchasing a home located in a neighborhood primarily occupied by minorities. This is an example of a discriminatory practice known as redlining, which is illegal and unethical. It has been historically used to exclude certain ethnic minorities from obtaining housing in specific neighborhoods, a clear violation of fair lending laws. On the other hand, option b: The loan applicant's debt-to-income ratio is 56%, option c: The loan applicant has a credit score of 530 and a history of delinquencies on previous loans, and option d: The consumer has no cash for a down payment are all valid financial reasons for a lender to deny a mortgage loan application. These reasons are related to the applicant's financial stability and ability to repay the loan, rather than any discriminatory factors based on race, ethnicity, or neighborhood demographics.