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

TILA — Truth in Lending Act

TILA (implemented by Regulation Z) ensures borrowers can compare the true cost of credit. The headline disclosure is the Annual Percentage Rate (APR), which folds the interest rate together with most finance charges (points, certain fees) into a single yearly percentage. The APR is usually higher than the note rate because it includes those costs.

TILA also governs how credit terms may be advertised. If an ad states a specific triggering term — such as the down payment amount, the number of payments, the payment amount, or a specific finance charge — it must also disclose the other key terms (APR, down payment, terms of repayment). Vague phrases like "low down payment" or "easy financing available" alone are not triggering terms and require no further disclosure. The point is that a number invites comparison, so the law forces full context whenever a specific figure appears.

Right of rescission

For certain consumer-credit transactions secured by the borrower's primary residence (notably refinances and home-equity loans — not the purchase loan on a home), TILA grants a 3-business-day right of rescission. The borrower may cancel without penalty by midnight of the third business day.

RESPA — Real Estate Settlement Procedures Act

RESPA (enforced by the CFPB) applies to federally related mortgage loans on 1–4 family residential property. Its goals are to give borrowers timely settlement-cost information and to eliminate abusive practices that inflate those costs.

Key RESPA rules:

• Section 8 anti-kickback — prohibits paying or accepting any fee, kickback, or thing of value for the referral of settlement-service business. A title company may not pay an agent for sending clients its way.
• No unearned fees — you cannot charge for services not actually performed.
• Affiliated Business Arrangement (AfBA) disclosure — if a provider refers business to an affiliated company, it must disclose the relationship and the borrower's right to shop elsewhere.
• Servicing transfer and escrow limits.

Trap: RESPA does not set prices or cap fees — it bans kickbacks and requires disclosure. A normal, earned commission split between cooperating brokers is not a RESPA violation; paying a non-licensee for a referral can be.

TRID — the combined disclosures

TRID (TILA-RESPA Integrated Disclosure, the "Know Before You Owe" rule) merged the old TILA and RESPA forms into two documents for most closed-end consumer mortgages:

The purpose is apples-to-apples comparison and no last-minute surprises. The borrower must receive the CD with time to compare it against the LE.

The CD waiting period and re-disclosure

The 3-business-day CD window can reset if certain major changes occur before closing: a change in the APR beyond tolerance, a change in the loan product, or addition of a prepayment penalty. Minor changes (e.g., small fee adjustments within tolerance, typo fixes, seller credits) generally do not restart the clock.

For the exam, anchor on the "3-3-3" pattern: the Loan Estimate goes out within 3 business days of application, the Closing Disclosure must be received at least 3 business days before closing, and only three specific changes (APR beyond tolerance, loan product change, or added prepayment penalty) trigger a new 3-day waiting period.

ECOA — Equal Credit Opportunity Act

ECOA (also Regulation B) prohibits discrimination in any aspect of a credit transaction. A lender may not discriminate 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, or because the applicant exercised rights under consumer-credit laws.

Practical ECOA duties:

• A lender may ask about marital status only in limited, permitted ways and cannot discount part-time or alimony income simply because of its source.
• On a denial or other adverse action, the lender must give the applicant a statement of specific reasons (or notice of the right to request them), generally within 30 days.

Distinguishing ECOA from Fair Housing

Trap: ECOA governs credit/lending and includes classes like age and marital status that the federal Fair Housing Act does not. The Fair Housing Act governs housing transactions (sale, rental) and protects race, color, religion, sex, national origin, familial status, and disability. Lending discrimination can implicate both laws.

Usury, Predatory Lending, and Putting the Regulations Together

Beyond the four core statutes, the exam expects you to recognize how they fit together and to spot predatory practices.

Which law governs which problem

Run a denied-loan fact pattern through this grid: if a lender rejected an applicant because income came from public assistance, that is ECOA, not RESPA; if a title company paid the agent for referrals, that is RESPA Section 8. Sorting the symptom to the statute is exactly what the exam asks.

Usury and predatory lending

Usury is charging interest above the legal maximum a state allows; usurious loans expose the lender to penalties.

Predatory lending describes abusive practices the regulations target: loan flipping (repeated needless refinancing to harvest fees), equity stripping, steering a qualified borrower into a higher-cost subprime loan, hidden balloon payments, and packing loans with unnecessary products. The Home Ownership and Equity Protection Act (HOEPA), an amendment to TILA, adds heightened disclosures and restrictions for high-cost mortgages.

The unifying theme: these statutes exist to ensure the borrower can see the true cost (TILA/TRID), is charged only for real services (RESPA), and is judged on creditworthiness rather than a protected trait (ECOA).