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

RESPA — Real Estate Settlement Procedures Act

RESPA applies to federally related mortgage loans on residential property (one to four units). Its goals are to give consumers clear, advance disclosure of settlement costs and to eliminate kickbacks and unearned fees that increase the cost of settlement services.

Key RESPA rules:

• Section 8 anti-kickback: it is illegal to pay or receive a fee, kickback, or thing of value for the referral of settlement-service business. A real-estate agent cannot accept a payment from a title company simply for steering clients there.
• Unearned fees: charging for services not actually performed is prohibited.
• Affiliated Business Arrangements (AfBA): must be disclosed, and the consumer must not be required to use the affiliate.
• Servicing transfer and escrow rules protect borrowers after closing.

Exam trap: a normal commission split between cooperating brokers for actual real-estate services is fine; paying a referral fee to a settlement-service provider for steering business is a RESPA violation.

TILA, the APR, and TRID timing

TILA (Truth in Lending Act), implemented through Regulation Z, requires lenders to disclose the cost of credit so borrowers can compare loans. The headline figure is the Annual Percentage Rate (APR) — the effective yearly cost of credit including certain finance charges, so it is usually higher than the note (interest) rate.

TILA also governs advertising: if an ad states a triggering term (such as the down payment amount, the number of payments, the payment amount, or the finance charge), the ad must then disclose the full credit terms (APR, terms of repayment, etc.). Saying merely "low down payment available" is general; stating "5% down" is a triggering term.

TRID (TILA-RESPA Integrated Disclosure) merged RESPA and TILA forms:

If certain terms change materially (APR, loan product, or a prepayment penalty is added), a new 3-business-day waiting period is triggered before closing.

ECOA — fair lending

The Equal Credit Opportunity Act 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. A lender may not discourage an application on these bases.

How the federal laws fit together

Think of the four laws by purpose, which is exactly how the exam frames scenario questions:

Right of rescission and other consumer rules

TILA gives borrowers a three-day right of rescission on certain loans secured by their principal residence — most notably refinances and home-equity loans with a new lender. The borrower may cancel within three business days. Important exam trap: this rescission right does not apply to a loan used to purchase the home; a purchase-money mortgage cannot be rescinded under this rule.

The Fair Credit Reporting Act (FCRA) governs how credit information is collected and used, and entitles consumers to know when credit reports affect a decision. While not always grouped with the big four, it appears in fair-lending questions.

Practical agent guidance: licensees should never quote an APR or promise loan terms, never accept a thing of value for steering buyers to a particular lender, title company, or inspector, and should refer financing questions to a licensed loan originator. Understanding these laws protects both the consumer and the licensee from liability.

ECOA, TRID Timing, and Worked Disclosure Deadlines

ECOA (Equal Credit Opportunity Act) bars credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or receipt of public assistance, and entitles applicants to notice of action and a copy of the appraisal. It parallels — but is broader on credit than — the Fair Housing Act.

TRID merged the old TILA and RESPA forms into two: the Loan Estimate (LE), which the lender must deliver within 3 business days of application, and the Closing Disclosure (CD), which the borrower must receive at least 3 business days before consummation. Certain changes — a switched loan product, an APR increase beyond tolerance, or addition of a prepayment penalty — reset the 3-day clock.

Worked timing: A borrower receives the CD on Monday with no resetting change; the earliest lawful closing is Thursday (Monday is day zero; Tuesday, Wednesday, Thursday are the three business days). If on Tuesday the lender raises the APR beyond tolerance, a new CD is required and the three-day count restarts, pushing closing later — a frequent exam calculation.