7.3 Federal Financing Regulations (RESPA, TILA, ECOA, TRID)
Key Takeaways
- TILA (Regulation Z) forces disclosure of APR, finance charges, and total of payments so borrowers compare the true cost of credit.
- RESPA bans kickbacks and unearned referral fees for settlement services and limits escrow cushions to about two months.
- TRID merges TILA and RESPA into the Loan Estimate (within 3 business days of application) and the Closing Disclosure (received at least 3 business days before closing).
- ECOA bars credit discrimination on race, color, religion, national origin, sex, marital status, age, and receipt of public assistance, and requires adverse-action notices.
- The CFPB enforces TRID, RESPA, TILA, and ECOA in residential mortgage lending.
TILA and Regulation Z
The Truth in Lending Act (TILA), implemented by Regulation Z, requires lenders to disclose the true cost of credit so consumers can shop loans on equal terms. Required disclosures include:
- APR (Annual Percentage Rate) — interest plus certain finance charges, expressed as a yearly rate. APR is almost always higher than the note rate because it folds in fees.
- Finance charge — the total dollar cost of credit.
- Total of payments — what the borrower pays over the full term.
Regulation Z also governs advertising: if an ad states one specific credit term (a "trigger term" like the down payment or monthly payment), it must disclose the others. Exam cue: APR = TILA.
RESPA
The Real Estate Settlement Procedures Act (RESPA) targets settlement-service abuses on federally related residential loans. Its core prohibitions:
- No kickbacks or unearned referral fees (RESPA Section 8) for steering business to title companies, inspectors, or other settlement providers. Splitting a fee for no actual service is illegal.
- Affiliated Business Arrangement (AfBA) disclosure — if a referral goes to a company the referrer has an ownership interest in, that relationship must be disclosed and the referral cannot be required.
- Escrow limits — a lender may keep only about a two-month cushion in the escrow/impound account.
Exam cue: referral fees, kickbacks, and settlement services = RESPA, not TILA.
TRID and the Two Forms
TRID (TILA-RESPA Integrated Disclosures) merged the old TIL statement and HUD-1 into two consumer forms, enforced by the CFPB. Memorize the timing — it is heavily tested.
| Form | What it is | Timing rule |
|---|---|---|
| Loan Estimate (LE) | Early, good-faith estimate of rate, payment, and costs | Delivered within 3 business days of loan application |
| Closing Disclosure (CD) | Final, actual loan terms and closing costs | Borrower must receive it at least 3 business days before closing |
If certain key terms change after the CD goes out — the APR increases beyond tolerance, a prepayment penalty is added, or the loan product changes — a new 3-business-day waiting period resets. Routine minor changes do not reset the clock.
ECOA and Fair Lending
The Equal Credit Opportunity Act (ECOA) prohibits discrimination in any credit transaction based on:
- Race or color
- Religion
- National origin
- Sex
- Marital status
- Age (provided the applicant can contract)
- Receipt of public assistance income
ECOA also requires an adverse-action notice: if an application is denied (or approved on materially worse terms), the lender must notify the applicant and state the reasons.
Do not confuse ECOA (credit/lending) with the Fair Housing Act (housing sale/rental). The Fair Housing Act's protected classes include familial status and disability; ECOA's list adds marital status, age, and public assistance income instead.
Quick Comparison and the Agent's Role
Use this map to answer "which law?" questions fast.
| Law | One-line focus | Key artifact |
|---|---|---|
| TILA / Reg Z | Cost of credit | APR, finance charge |
| RESPA | Settlement-service abuses | No kickbacks; escrow limits; AfBA |
| TRID | Standardized disclosure timing | Loan Estimate; Closing Disclosure |
| ECOA | Nondiscrimination in lending | Adverse-action notice |
A salesperson must also respect appraiser independence — agents may share factual data but may not pressure an appraiser toward a value. If the appraisal comes in low, the lender reduces the loan or requires more cash. The CFPB is the federal enforcer across these statutes.
The Four Federal Financing Laws
Four federal statutes dominate this topic. RESPA (Real Estate Settlement Procedures Act) applies to most residential mortgages; it prohibits kickbacks and unearned referral fees between settlement-service providers and requires good-faith disclosure of closing costs. TILA (Truth in Lending Act), implemented by Regulation Z, requires disclosure of the annual percentage rate (APR) and total finance charge so borrowers can compare loans, and it governs advertising of credit terms, requiring that if one triggering term (such as a down-payment amount or monthly payment) appears, all key terms must be disclosed.
ECOA (Equal Credit Opportunity Act) prohibits discrimination in lending based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. TRID (TILA-RESPA Integrated Disclosure) merged earlier forms into two: the Loan Estimate, delivered within 3 business days of application, and the Closing Disclosure, which the borrower must receive at least 3 business days before closing so the final terms can be compared against the estimate.
Right of Rescission and Disclosure Timing
Under TILA, a borrower refinancing or taking a home-equity loan on a primary residence has a three-business-day right of rescission to cancel the loan; this right does not apply to a loan used to purchase or build the home. RESPA also requires lenders to provide a list of homeownership-counseling organizations and limits the amount a lender may require in an escrow (impound) account for taxes and insurance. Memorize the TRID timeline: Loan Estimate within 3 business days of application, and Closing Disclosure received at least 3 business days before consummation.
Under TRID, when must the borrower receive the Closing Disclosure?
A title company pays a real estate agent a fee for every closing the agent steers to it, with no service performed. Which federal law does this violate?