What practice involves lenders refusing to offer loans based on discriminatory factors?

Redlining is a practice where lenders systematically refuse to offer loans or provide less favorable terms based on discriminatory factors, typically related to race, ethnicity, or socioeconomic status. This term originated from the practice of using red ink to outline neighborhoods on maps where lenders would deny access to mortgage loans, thus marginalizing specific areas and communities.

This practice has significant implications as it reinforces systemic inequities in housing and economic opportunity. It restricts individuals and families from gaining access to credit and homeownership, which are crucial components of wealth accumulation and financial stability. Policies aimed at combating redlining focus on fostering fair lending practices and ensuring that all potential borrowers are treated equitably, regardless of the neighborhood in which they reside.

Other options like underwriting, loan churning, and equity stripping refer to different financial practices not primarily related to discriminatory lending policies, which is why they do not apply in this context. Underwriting is the process of assessing loan risk, loan churning involves repeatedly refinancing mortgages to generate fees, and equity stripping refers to the practice of taking equity from a property without enhancing its value.