7.3 Federal Financing Regulations (RESPA, TILA, ECOA, TRID)

Federal consumer-protection statutes govern how lenders disclose costs and treat borrowers. The exam tests which law does what and the timing rules. Memorize the acronyms and their single core purpose.

The Four Core Laws

TILA and the APR

TILA, implemented by Regulation Z, requires lenders to disclose the Annual Percentage Rate (APR) — the true cost of credit including interest plus finance charges (points, certain fees). The APR is therefore usually higher than the note rate.

Advertising trigger terms: if an ad states a specific term — down payment amount, payment amount, number of payments, or rate as a periodic figure — it must also disclose APR and full terms. Saying only "low down payment" or "affordable" triggers nothing. Trap: APR vs. interest rate — the interest rate prices the note; the APR prices the whole cost of borrowing.

RESPA — Settlement and Kickbacks

RESPA applies to federally related mortgage loans on 1–4 unit residential property. Its teeth are in Section 8, which prohibits kickbacks, referral fees, and unearned fee splits between settlement-service providers (lenders, title companies, appraisers, agents).

• A title company may not pay an agent for steering clients to it.
• An Affiliated Business Arrangement (AfBA) is allowed only if disclosed, the consumer is free to shop, and no fee is paid solely for the referral. RESPA also limits the cushion a lender may hold in an escrow/impound account.

ECOA — Equal Credit Opportunity Act

ECOA (also under Regulation B) prohibits credit discrimination based on race, color, religion, national origin, sex, marital status, age, or because income comes from public assistance. A lender cannot ask about childbearing plans or discount a spouse's income.

Note the overlap-but-difference with Fair Housing: Fair Housing covers the housing transaction; ECOA covers the credit decision. ECOA adds age and public-assistance income as protected categories that Fair Housing does not list.

TRID — The Two Forms and the Timing Rules

TRID ("Know Before You Owe") replaced four old forms with two:

• Loan Estimate (LE) — lender must deliver within 3 business days of application; good-faith estimate of rate, payment, and closing costs.
• Closing Disclosure (CD) — final terms; borrower must receive it at least 3 business days before consummation.

The gap exists so borrowers can compare LE to CD. Certain changes (APR increases beyond tolerance, a prepayment penalty added, or loan-product change) re-start the 3-day clock.

Worked Scenario — Which Law?

A loan officer offers a real estate agent $300 per referred buyer who closes a loan. Which law is violated? RESPA Section 8 — unearned referral fee.

An ad reads "$0 down, $1,499/month, 30 years" but omits APR. Violation? TILA / Reg Z — trigger terms used without required disclosures.

A lender refuses to count a married applicant's part-time income because she "might have children." Violation? ECOA — discrimination by sex/marital/childbearing assumptions.

The CFPB and Enforcement

The Consumer Financial Protection Bureau (CFPB) writes and enforces the rules under TILA, RESPA, ECOA, and TRID. Rulemaking moved to the CFPB after the 2010 Dodd-Frank Act, which is why exam answer choices may reference the CFPB rather than HUD or the Federal Reserve.

Violations carry real teeth: ECOA and RESPA allow private lawsuits plus statutory damages, and ECOA requires a lender to give an adverse-action notice with specific reasons when it denies credit. Keep the agencies straight — HUD enforces the Fair Housing Act; the CFPB enforces the financing-disclosure statutes in this section.

The Three-Day Right of Rescission

Separate from the TRID waiting periods, TILA grants a three-business-day right of rescission on certain refinances and home-equity loans on a primary residence — the borrower may cancel within three business days after closing with no penalty.

Critical trap: the right of rescission does not apply to a loan used to purchase a home. It protects owners pledging an existing primary residence, not buyers. Saturdays count as business days for rescission; Sundays and federal holidays do not. This is a favorite distractor paired with the TRID 3-day disclosure rule, which is a different clock entirely.

Putting the Statutes Together

For exam fact patterns, run a quick triage:

• A question about APR, finance charges, or advertised terms → TILA / Regulation Z.
• A question about closing-cost disclosure, kickbacks, escrow cushions, or affiliated businesses → RESPA.
• A question about denial of credit, protected classes, or adverse-action notices → ECOA / Regulation B.
• A question about Loan Estimate or Closing Disclosure forms and timing → TRID.

Also recall the Fair Credit Reporting Act (FCRA), which governs how credit reports are pulled and disputed, and requires a borrower be told if a report caused an adverse decision. Distinguishing FCRA (the report) from ECOA (the decision) is a common high-level distractor on the national exam.