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

RESPA — Real Estate Settlement Procedures Act

RESPA applies to federally related mortgage loans on one-to-four-family residential property. Its goals: disclose settlement costs and curb practices that inflate them.

RESPA's headline rule is the Section 8 prohibition on kickbacks and unearned fees: you cannot pay or receive anything of value for the mere referral of settlement business such as title, escrow, inspection, or insurance. A title company cannot pay an agent for steering closings to it, and a lender cannot give an agent a gift for referrals.

Lawful, fully disclosed Affiliated Business Arrangements — where the consumer is told of the relationship and may shop elsewhere — are an exception. RESPA also limits the cushion a lender may hold in an escrow (impound) account for taxes and insurance, and prohibits requiring the buyer to use a particular title company.

Penalties for Section 8 violations include fines and even imprisonment, so this is a serious compliance area for agents. RESPA additionally requires lenders to provide a written mortgage servicing disclosure and limits how servicing transfers are handled.

TILA / Regulation Z — Truth in Lending

TILA, implemented by Regulation Z, ensures borrowers know the true cost of credit. Its centerpiece is the annual percentage rate (APR) — the effective yearly cost including interest plus most finance charges (origination, discount points, mortgage insurance). Because it folds in those costs, the APR is normally higher than the note (contract) rate.

TILA also controls advertising of consumer credit. If an ad states one specific trigger term — the down payment amount, the number of payments, the payment amount, or the finance charge — it must then disclose the full terms: the amount or percentage of the down payment, the repayment terms, and the APR. A bare "low rates available!" is fine; "only $99/month!" or "5% down!" triggers full disclosure.

TILA's purpose is to let consumers comparison-shop credit on equal footing, which is why the APR (not just the note rate) must appear in disclosures. Note that TILA applies to consumer credit for personal, family, or household purposes — not to commercial or business loans, which fall outside its protections.

TRID — the combined disclosures

The TILA-RESPA Integrated Disclosure (TRID) rule merged the old four forms into two consumer documents:

The waiting period lets the borrower compare the CD to the LE and confront unexpected fee increases. Re-triggering the 3-day wait happens for three changes: a change to the APR beyond tolerance, a switch in loan product, or the addition of a prepayment penalty. Minor fee corrections do not restart the clock. Trap: candidates assume any change resets the three days — only those three do.

ECOA — Equal Credit Opportunity Act

ECOA prohibits discrimination in any aspect of a credit transaction based on race, color, religion, national origin, sex, marital status, age (if old enough to contract), or because income comes from a public-assistance program.

Key duties for lenders:

• May not discourage an application or apply different terms based on a protected class.
• Must notify an applicant of action taken within 30 days and, on denial, provide specific reasons for the adverse action.
• May not ask about childbearing plans or require a spouse's signature when the applicant individually qualifies.

Distinguish: ECOA covers lending; the Fair Housing Act covers housing transactions (sale/rental). They overlap but are separate laws — exam questions test which applies to a lender's decision (ECOA) vs. a landlord's (FHA).

Other names to recognize

• Right of rescission — under TILA, on a refinance or home-equity loan on a primary residence, the borrower has 3 business days to cancel. It does not apply to a purchase-money loan on the home being bought.
• CFPB — the Consumer Financial Protection Bureau now enforces RESPA, TILA, ECOA, and the TRID rule.
• Predatory lending / HOEPA — adds protections for high-cost loans (excessive fees, equity stripping, loan flipping).
• Fair Credit Reporting Act (FCRA) — governs the accuracy and use of consumer credit reports that lenders pull.

Keep the four core laws straight by their one-line job: RESPA polices settlement costs and kickbacks, TILA discloses the cost of credit (APR), TRID sets the timing of the LE and CD, and ECOA bans discrimination in lending. Exam questions usually describe a scenario and ask which law applies, so anchor each to its single core function.

Usury, Reg Z scope, and the agent's role

Usury laws (set by states) cap the maximum interest rate a lender may charge; a loan above the legal limit is usurious and the lender can face penalties. The exam may pair this with TILA, but they are separate: usury limits the rate, TILA requires disclosure of the rate.

Real estate agents are not lenders, yet these laws shape their practice. An agent who advertises a listing with financing terms ("assume seller's loan, only $1,200/month") can trigger TILA advertising disclosure rules, and an agent who steers buyers to a preferred lender for a thing of value risks a RESPA Section 8 violation. The safe practice is to disclose any business relationship, never accept undisclosed referral payments, and let licensed loan officers quote credit terms. Agents should also recognize a possible ECOA violation in a scenario and refer the buyer to complain to the CFPB rather than advise on the lending decision themselves.