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

RESPA — Settlement Cost Protection

The Real Estate Settlement Procedures Act (RESPA) applies to most federally related residential mortgage loans (one-to-four-unit dwellings). Its goals are to make settlement costs transparent and to eliminate abusive practices.

RESPA's Section 8 prohibits kickbacks, fee-splitting, and unearned referral fees between settlement-service providers. Paying a real-estate agent a fee simply for referring a buyer to a lender or title company is illegal. RESPA also limits how much a lender can require a borrower to keep in an escrow/impound account for taxes and insurance.

TILA — Truth in Lending

The Truth in Lending Act (TILA), implemented through Regulation Z, ensures borrowers understand the true cost of credit. Its centerpiece is the Annual Percentage Rate (APR) — the cost of credit expressed as a yearly rate that includes interest plus most finance charges, letting borrowers compare offers on equal footing.

TILA controls advertising too. If an ad states a trigger term (such as a specific down payment, payment amount, number of payments, or finance charge), the ad must also disclose the APR and other key terms. Certain refinances of a primary residence carry a three-day right of rescission.

ECOA — Equal Credit Opportunity

The Equal Credit Opportunity Act (ECOA) prohibits discrimination in any credit transaction based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. A lender may not discourage an application or set different terms because an applicant belongs to a protected class.

A common exam point: a lender may ask about income and ability to repay, but it cannot deny credit because part of that income comes from a protected source such as public assistance, alimony, or part-time work.

TRID — Two Forms, Strict Timing

TRID (TILA-RESPA Integrated Disclosure) merged the older disclosure forms into two consumer documents administered by the CFPB (Consumer Financial Protection Bureau):

The three-business-day rule before closing is heavily tested. If certain terms change materially (the APR increases beyond tolerance, a prepayment penalty is added, or the loan product changes), a new three-day waiting period restarts.

Counting the Days and the Three "Threes"

TRID timing trips up candidates because three different three-day rules collide. Keep them separate:

The right of rescission applies to refinances and home-equity loans on a principal residence — not to a purchase loan. A buyer purchasing a home cannot rescind under TILA, but an owner refinancing can cancel within three business days. That distinction is a frequent trap.

Memory hook: "Three to receive, three to leave." Three business days to receive the CD before closing; three business days to rescind a qualifying refinance afterward.

What Changes Restart the Clock, and the Agent's Role

Not every revision to the Closing Disclosure forces a new three-day wait. Only three changes restart the clock:

1. The APR becomes inaccurate beyond tolerance (more than 1/8% for most loans).
2. A prepayment penalty is added.
3. The loan product changes (for example, fixed converts to adjustable).

Minor fixes — a corrected seller credit, a small fee adjustment, a typo — do not restart the waiting period; they are simply corrected on a revised CD at the table. This is why an agent who negotiates a last-minute price reduction the day before closing rarely delays the closing, but switching the buyer to a different loan program almost certainly does.

Agent best practice and liability. A salesperson does not prepare these forms, but the exam expects you to know that steering a buyer toward an affiliated lender or title company for a kickback violates RESPA Section 8, and that promising a closing date without accounting for the CD waiting period sets up a missed deadline. ECOA also requires a lender to provide an adverse-action notice with reasons when it denies credit, and to act on a completed application within 30 days — facts that round out the consumer-protection picture the national exam tests as a group.

Pulling the Four Laws Together

The national exam often hands you a fact pattern and asks which federal law applies. Sort by the harm:

Who enforces what. The CFPB administers RESPA, TILA, and TRID for most consumer mortgages, and shares ECOA enforcement. Penalties range from statutory damages and rescission to civil fines, and an agent who participates in a kickback scheme can be named alongside the lender.

Final trap: the APR is not the interest rate. The note rate is the cost of borrowing the principal; the APR folds in points, most fees, and mortgage insurance, so the APR is normally higher than the note rate. A question that says "which figure lets a borrower compare two loans on equal footing" wants the APR, while "which figure determines the monthly interest" wants the note rate.