7.3 Federal Financing Regulations (RESPA, TILA, ECOA, TRID)
Key Takeaways
- RESPA prohibits kickbacks and unearned referral fees and governs settlement-cost disclosures on federally related mortgages.
- TILA (Regulation Z) requires disclosure of the cost of credit, including the APR, and triggers a 3-day right of rescission on certain refinances.
- ECOA bars credit discrimination based on protected classes such as race, color, religion, national origin, sex, marital status, age, and receipt of public assistance.
- TRID combined RESPA and TILA disclosures into the Loan Estimate (within 3 business days of application) and Closing Disclosure (at least 3 business days before consummation).
- Regulation Z advertising rules require that if any trigger term appears, full credit terms must also be disclosed.
RESPA — Real Estate Settlement Procedures Act
RESPA applies to federally related mortgage loans secured by one-to-four-family residential property. Its two big themes:
- Disclosure of settlement costs so consumers can shop and understand fees.
- Anti-kickback rules: Section 8 prohibits paying or accepting any fee, kickback, or thing of value for referring settlement-service business, and prohibits unearned fees (charging for work not actually performed).
RESPA also limits the amount a lender can require in an escrow (impound) account for taxes and insurance, and bars a seller from requiring the buyer to use a particular title insurer.
Exam trap: A licensee accepting a gift card from a lender for steering clients to that lender violates RESPA Section 8 — even if the buyer was free to choose. Referral fees among settlement providers are prohibited; ordinary cooperative real-estate commission splits between brokers are allowed.
TILA — Truth in Lending Act (Regulation Z)
TILA, implemented by Regulation Z, ensures borrowers understand the cost of credit. Its centerpiece is the annual percentage rate (APR), which expresses the total yearly cost of credit — interest plus certain finance charges — as a percentage, so consumers can compare loans on an apples-to-apples basis.
Right of rescission: on certain consumer credit secured by the borrower's principal dwelling (such as a refinance or home-equity loan — not a purchase-money first mortgage), the borrower has three business days to cancel.
Advertising / trigger terms: if an ad states a trigger term — the down payment amount, the number of payments, the period of repayment, or the amount of any payment/finance charge — it must also disclose the full terms (e.g., down payment, terms of repayment, and the APR). Stating only "as low as $99/month" without the full terms violates Regulation Z. By contrast, general statements such as "low rates available" or "affordable financing" are not trigger terms and require no extra disclosure. The classic exam trap is an ad that names a specific down payment or monthly payment but omits the APR.
Also distinguish interest rate from APR: the interest rate is the cost of borrowing the principal alone, while the APR rolls in points, certain fees, and mortgage insurance, so the APR is normally higher than the note rate. TILA does not set rates or fees — it only mandates disclosure so the borrower can compare.
ECOA — Equal Credit Opportunity Act
ECOA prohibits discrimination in any aspect of a credit transaction based on:
- Race or color
- Religion
- National origin
- Sex (including sexual orientation/gender identity per current guidance)
- Marital status
- Age (provided the applicant can contract)
- Receipt of income from public assistance programs
- Good-faith exercise of rights under the Consumer Credit Protection Act
Note that ECOA's protected list overlaps with but is not identical to the federal Fair Housing Act. ECOA adds marital status, age, and public-assistance income, which the Fair Housing Act does not list. A lender must also notify an applicant of action taken on an application (approval, denial, counteroffer) within set timeframes.
TRID — TILA-RESPA Integrated Disclosure
TRID merged the older RESPA and TILA forms into two documents:
| Form | Replaces | Timing |
|---|---|---|
| Loan Estimate (LE) | GFE + early TIL | Within 3 business days of loan application |
| Closing Disclosure (CD) | HUD-1 + final TIL | Borrower must receive at least 3 business days before consummation (closing) |
The three-day CD window gives the borrower time to compare final terms to the Loan Estimate. Certain changes (an APR increase beyond tolerance, a prepayment-penalty addition, or a change in loan product) restart the three-day clock; most minor changes do not.
Quick memory grid
- RESPA = settlement costs + no kickbacks.
- TILA/Reg Z = cost of credit (APR), rescission, ad trigger terms.
- ECOA = no credit discrimination (adds marital status, age, public assistance).
- TRID = LE in 3 days after application; CD 3 days before closing.
How the laws interact
These statutes overlap but target different harms, and the exam rewards you for picking the right law for a fact pattern. A fee for steering business is RESPA. A misleading payment ad or a missing APR is TILA. Refusing credit because an applicant is a single woman receiving public assistance is ECOA. A late closing form or a Loan Estimate not delivered within three business days of application is TRID.
When a question describes denying a loan based on the applicant's marital status, choose ECOA, not Fair Housing, because marital status is an ECOA protected class but not a federal Fair Housing class. The enforcement agency for most of these consumer-credit rules today is the Consumer Financial Protection Bureau (CFPB), which a well-prepared candidate should recognize by name.
A title company pays a real estate agent $50 for each buyer the agent refers, regardless of whether the title company performs extra work. Which law does this violate?
Under TRID, when must the borrower receive the Closing Disclosure?
Mortgage fraud, the SAFE Act, and predatory-lending red flags
Federal financing rules also police who may originate loans and how loans are sold. The SAFE Act requires individual mortgage loan originators to be licensed or registered through the Nationwide Multistate Licensing System (NMLS), creating a traceable record for every originator. The exam may pair this with the idea that a real estate licensee who also takes loan applications must hold the appropriate MLO credential — wearing one hat does not cover the other.
Predatory and fraudulent practices to recognize
| Practice | What it is |
|---|---|
| Steering | Pushing a borrower to a worse loan for the originator's gain |
| Loan flipping | Repeated needless refinancing that strips equity in fees |
| Equity skimming / straw buyer | Using a fake or front buyer to extract value |
| Appraisal fraud | Inflating value to support an oversized loan |
A fact pattern describing a licensee, lender, and appraiser coordinating to inflate a value and split the proceeds is mortgage fraud, exposing all participants to criminal liability — distinct from a mere disclosure violation. The CFPB and the Department of Justice, not a state real estate commission alone, drive these enforcement actions, and the well-prepared candidate distinguishes a regulatory disclosure lapse from outright fraud.