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

The Consumer-Protection Layer on Lending

Four federal laws govern how lenders disclose costs, treat applicants, and handle settlement services. The national exam expects you to match each acronym to its purpose and to know who enforces it. Most are administered today by the Consumer Financial Protection Bureau (CFPB).

TILA and the Truth in Lending Act

The Truth in Lending Act (TILA), implemented by Regulation Z, requires lenders to disclose the true cost of credit so consumers can compare loans. Its signature figure is the Annual Percentage Rate (APR), which folds interest plus finance charges (points, certain fees) into a single yearly rate.

TILA also governs advertising: if an ad states a trigger term—such as the down payment, monthly payment, term, or APR—the ad must disclose all material terms. Vague phrases like "low monthly payments" are not triggers.

TILA gives borrowers a right of rescission (a 3-business-day cancellation window) on certain refinances and home-equity loans on a primary residence. This right does not apply to a purchase-money loan to buy a home—a common exam trap. Rescission counts Saturdays but excludes Sundays and federal holidays.

RESPA and Settlement Services

The Real Estate Settlement Procedures Act (RESPA) applies to federally related mortgage loans on 1–4 unit residential property. Its goals are transparency in settlement costs and the elimination of abusive practices.

• Section 8 prohibits kickbacks and unearned fees—you cannot pay or receive anything of value for referring settlement business.
• It limits the amount a lender can require in escrow/impound reserves for taxes and insurance.
• It mandates disclosure of affiliated business arrangements when a provider refers business to a company it owns.

ECOA and Fair Lending

The Equal Credit Opportunity Act (ECOA), implemented by Regulation B, prohibits discrimination in any credit transaction based on race, color, religion, national origin, sex, marital status, age, or because income comes from public assistance.

Note the distinction tested often: ECOA covers all credit, while the federal Fair Housing Act covers housing transactions. A lender must also provide a notice of action taken—an approval or a denial with reasons—within 30 days of a completed application.

TRID: Integrating the Disclosures

TRID (the TILA-RESPA Integrated Disclosure rule, sometimes called "Know Before You Owe") merged the old GFE and TILA disclosures into two forms:

The 3-day rule before closing is critical: certain changes (a higher APR, adding a prepayment penalty, or switching loan product) restart the 3-day clock.

Quick Acronym Map

• TILA / Reg Z → cost of credit, APR, advertising triggers, rescission.
• RESPA → settlement-cost transparency, no kickbacks (Sec. 8), escrow limits.
• ECOA / Reg B → no discrimination in credit; notice of action taken.
• TRID → Loan Estimate (3 days after application) + Closing Disclosure (3 days before closing).

Enforcement of all four primarily sits with the CFPB for most consumer mortgages.

TILA, Reg Z, and the Right of Rescission

The Truth in Lending Act (TILA), implemented by Regulation Z, requires lenders to disclose the true cost of credit, expressed as the annual percentage rate (APR) so borrowers can compare offers. Reg Z also governs advertising: stating any trigger term (a specific down payment, payment amount, term, or finance charge) forces disclosure of the APR and other terms. Reg Z grants a three-business-day right of rescission on a refinance or home-equity loan secured by the borrower's principal residence — but not on a purchase-money loan to buy a home.

The exam loves the trap that there is no rescission right on the loan used to purchase the property; rescission applies to certain refinances of an existing primary residence.

ECOA and the TRID Timeline

The Equal Credit Opportunity Act (ECOA), Regulation B, prohibits discrimination in any credit decision based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance, and requires a notice of action taken on an application. TRID combined TILA and RESPA disclosures into two forms: the lender must deliver the Loan Estimate within three business days of a completed application, and the Closing Disclosure must reach the borrower at least three business days before consummation.

Certain changes — an APR increase beyond tolerance, adding a prepayment penalty, or switching the loan product — restart that three-day clock. This waiting period gives the borrower time to compare final terms against the original estimate.

keyTakeaways

• TILA/Reg Z discloses the cost of credit via the APR, regulates advertising trigger terms, and grants a 3-day rescission on refinances—not purchase loans.
• RESPA Section 8 bans kickbacks and unearned referral fees on federally related residential loans.
• ECOA/Reg B bars credit discrimination on protected bases and requires a notice of action taken.
• TRID = Loan Estimate within 3 business days of application + Closing Disclosure at least 3 business days before closing.
• The CFPB is the primary enforcer of these consumer-mortgage rules.

Summary

Federal financing law layers consumer protection over lending: TILA standardizes cost disclosure, RESPA polices settlement services and kickbacks, ECOA guarantees nondiscriminatory access to credit, and TRID times the integrated disclosures. Knowing each acronym's purpose, the 3-day timing rules, and that purchase loans lack rescission rights resolves most regulation questions on the national exam.