What type of institution is required by law to allocate a certain percentage of its loans as home mortgages?

What type of institution is required by law to allocate a certain percentage of its loans as home mortgages?

• A. Savings and loan association
• B. Commercial bank
• C. Credit union
• D. Mortgage brokerage

Answer: (A)

The correct answer is that a savings and loan association is required by law to allocate a certain percentage of its loans as home mortgages. Savings and loan associations, also known as thrifts, were originally established to promote homeownership and provide loans specifically for purchasing homes. This legal mandate helps ensure that these institutions fulfill their role in supporting the housing market and providing consumers with access to mortgage financing. These associations focus on residential lending and have a particular obligation to utilize a significant portion of their funds for home mortgages, distinguishing them from commercial banks and credit unions, which may have broader lending practices that are not specifically mandated to prioritize home loans. Mortgage brokerages, on the other hand, do not hold deposits or make loans directly; they primarily serve as intermediaries, thus they are not subject to the same mortgage allocation requirements.

The correct answer is that a savings and loan association is required by law to allocate a certain percentage of its loans as home mortgages. Savings and loan associations, also known as thrifts, were originally established to promote homeownership and provide loans specifically for purchasing homes. This legal mandate helps ensure that these institutions fulfill their role in supporting the housing market and providing consumers with access to mortgage financing.

These associations focus on residential lending and have a particular obligation to utilize a significant portion of their funds for home mortgages, distinguishing them from commercial banks and credit unions, which may have broader lending practices that are not specifically mandated to prioritize home loans. Mortgage brokerages, on the other hand, do not hold deposits or make loans directly; they primarily serve as intermediaries, thus they are not subject to the same mortgage allocation requirements.