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

The four laws and what each polices

All four are enforced today primarily by the CFPB (Consumer Financial Protection Bureau). They apply to consumer mortgage credit, not most commercial loans.

RESPA (Real Estate Settlement Procedures Act)

RESPA covers federally related mortgage loans on 1–4 family residential property. Its most tested rule is Section 8: no kickbacks, referral fees, or unearned fees among settlement-service providers. A title company cannot pay an agent for steering buyers to it.

RESPA also limits the amount a lender can require in an escrow/impound account for taxes and insurance and requires disclosure of affiliated business arrangements. Trap: A normal commission split or a payment for services actually performed is legal; paying for the referral itself is the violation.

TILA (Truth in Lending Act) and Regulation Z

TILA requires lenders to disclose the true cost of credit, most importantly the APR (annual percentage rate), which includes interest plus certain finance charges — so APR is usually higher than the note rate. TILA also gives a right of rescission (a 3-business-day cancel window) on most refinances of a primary residence — but not on a loan to purchase a home.

Advertising trigger terms: If an ad states any one of these specifics — the down payment amount, the number of payments, the payment amount, or the finance charge — the ad must then disclose the full terms (APR, down payment, terms of repayment). Saying only 'low monthly payments!' is fine; saying '$1,200/month' triggers full disclosure.

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, or because income comes from public assistance. Note this list overlaps but is not identical to the Fair Housing Act protected classes — ECOA adds marital status, age, and public-assistance income and is about credit, while Fair Housing is about housing transactions and adds familial status and disability.

A lender must also give an adverse action notice explaining why credit was denied.

TRID — the integrated disclosures

TRID ('TILA-RESPA Integrated Disclosure,' also called 'Know Before You Owe') combined four old forms into two:

• Loan Estimate (LE): must be delivered within 3 business days of the borrower's loan application.
• Closing Disclosure (CD): the borrower must receive it at least 3 business days before consummation/closing.

If certain key terms change after the CD (APR increases beyond tolerance, a prepayment penalty is added, or the loan product changes), a new 3-business-day waiting period restarts. Memory hook: TRID is a '3-3 rule' — 3 days to give the LE, 3 days to review the CD before closing.

Other federal lending laws worth knowing

• Home Mortgage Disclosure Act (HMDA): requires lenders to report loan-application data (location, demographics, approvals/denials) so regulators can detect discriminatory or redlining patterns.
• Fair Credit Reporting Act (FCRA): governs how credit information is collected and used; consumers can dispute inaccurate items and get a free annual report.
• CAN-SPAM / Do-Not-Call: affect how lenders and agents may market.
• Mortgage Acts and Practices (Reg N): bans deceptive mortgage advertising.

These rarely dominate a question, but distractors borrow their names. Match the law to its job: HMDA = data reporting, FCRA = credit reports, ECOA = non-discrimination in granting credit, RESPA = settlement charges and kickbacks.

Putting the four laws together

A single transaction touches all four. At application, ECOA bars the loan officer from discouraging a borrower because of marital status, and TRID starts the 3-day Loan Estimate clock. During processing, RESPA forbids the lender from paying the listing agent a fee just for steering the borrower to an affiliated title company. Before closing, TILA's APR appears on the Closing Disclosure so the borrower sees the true cost, and TRID requires the borrower to receive that CD three business days early.

Common exam framing: the question describes a behavior (a kickback, a vague monthly-payment ad, a denial based on age, a late disclosure) and asks which law was violated. Anchor on the trigger: referral fee → RESPA; ad trigger term → TILA; protected-class denial → ECOA; disclosure-timing failure → TRID.

Which law governs which problem

RESPA Section 8 is the heavily tested rule: paying or accepting anything of value for the referral of settlement business is illegal. An agent may not receive a "thank-you" fee from a title company or lender for steering clients — even a gift card can violate it.

TRID timing and an APR-trigger scenario

Under TRID, the lender must deliver the Loan Estimate within 3 business days of application and the Closing Disclosure at least 3 business days before consummation. Three changes restart that 3-day clock: a switch in loan product, addition of a prepayment penalty, or an APR change beyond tolerance (1/8% for fixed-rate).

Worked TILA-advertising scenario: a brokerage ad states "Homes from $1,200/month, only 5% down." Those are trigger terms under Reg Z, so the ad must also disclose the APR, the number and amount of payments, and the total of payments. Omitting them is a TILA violation. Note APR vs. interest rate: the APR folds in points and most finance charges, so it is always equal to or higher than the note rate — a classic two-answer trap.