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

Federal lending laws exist to make financing transparent and fair. The exam tests which law does what, so learn each statute by its single defining purpose. Four laws dominate: TILA (disclosure of credit cost), RESPA (settlement-process honesty), ECOA (equal access to credit), and TRID (the combined disclosure rule that ties TILA and RESPA together). Confusing them is the most common error, so anchor each to a keyword. Most of these rules are enforced by the Consumer Financial Protection Bureau (CFPB), which writes the implementing regulations and can penalize lenders for violations.

TILA and Regulation Z

The Truth in Lending Act (TILA), implemented by Regulation Z, requires lenders to disclose the true cost of credit so borrowers can compare offers. Its signature figure is the Annual Percentage Rate (APR), which folds the interest rate plus certain finance charges into a single yearly percentage. TILA also governs the finance charge, advertising of credit terms, and the borrower's right of rescission on certain refinances of a primary residence (a three-business-day window). Keyword: APR / cost of credit.

RESPA

The Real Estate Settlement Procedures Act (RESPA) governs the settlement process for federally related mortgage loans. It prohibits kickbacks, fee-splitting, and unearned referral fees between settlement service providers, and it requires disclosure of affiliated business arrangements. It also limits the size of escrow (impound) accounts a lender may require. Keyword: kickbacks / settlement services. Steering a buyer to an affiliated title company for an undisclosed referral fee is a classic RESPA violation.

ECOA

The Equal Credit Opportunity Act (ECOA) prohibits discrimination in lending based on race, color, religion, national origin, sex, marital status, age (provided the applicant can contract), or because income comes from a public assistance program. If a lender denies credit, ECOA requires an adverse action notice stating the reasons. Note that ECOA's protected classes differ from the Fair Housing Act's; ECOA adds marital status, age, and public-assistance income. Keyword: fair lending / adverse action.

TRID and the Two Forms

TRID (TILA-RESPA Integrated Disclosure) merged older forms into two consumer documents:

• The Loan Estimate (LE) must be delivered within 3 business days after the lender receives a complete application. It gives an early, good-faith estimate of terms and costs.
• The Closing Disclosure (CD) must be received at least 3 business days before consummation (closing), showing the final, actual terms and costs.

Borrowers compare the CD to the LE to confirm fees and terms did not change beyond allowed tolerances.

Table: Law-to-Keyword Quick Reference

Predatory Lending and Appraiser Independence

Predatory lending includes steering a qualified borrower into a higher-cost loan, loading hidden fees, or making loans the borrower cannot repay. A common example: a lender pushes a borrower who qualifies for a prime loan into a subprime product that pays the lender more. Federal rules also require appraiser independence: lenders may not pressure appraisers to hit a target value, and ordering must run through a firewall such as an appraisal management company. Agents may share factual property data but cannot attempt to influence the appraised value.

Comparing the Loan Estimate and Closing Disclosure

The Loan Estimate is issued early, based on the initial application, while the Closing Disclosure shows the final numbers. Borrowers compare them line by line. Certain charges (such as the lender's own fees) may not increase at all; others may increase only within a limited percentage tolerance; and a few may change freely. If costs exceed allowed tolerances, the lender may have to issue a revised disclosure or cure the difference. Significant changes can also reset the three-day waiting period before closing.

Other Key Federal Rules

• The Fair Credit Reporting Act (FCRA) governs how credit information is collected and used and supports adverse-action requirements.
• The SAFE Act requires licensing and registration of mortgage loan originators.
• The Dodd-Frank Act added ability-to-repay and qualified mortgage standards to curb risky lending.

These supplement the four core statutes but are tested less heavily than TILA, RESPA, ECOA, and TRID. When a question describes a financing scenario, identify the harm first (hidden cost, kickback, discrimination, or a missing disclosure deadline) and the correct law usually follows.

Exam Application Check

• Which law discloses APR? TILA.
• Which law prohibits kickbacks? RESPA.
• Which law mandates the Closing Disclosure timing? TRID.
• Which law bars discrimination by marital status and requires an adverse action notice? ECOA.
• Which act licenses mortgage loan originators? SAFE Act.