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

RESPA: Real Estate Settlement Procedures Act

RESPA applies to most federally related mortgage loans on residential property (1-4 units). Its core purposes are to disclose settlement costs and to prohibit abusive practices that inflate them.

Key RESPA rules:

• No kickbacks or referral fees — Section 8 bars paying or receiving anything of value for the referral of settlement-service business. A title company cannot pay an agent for steering buyers to it.
• No unearned fees — a fee may only be charged for services actually performed.
• Controlled business / affiliated business arrangements must be disclosed, and the consumer must be free to shop.
• RESPA limits the cushion a lender may hold in an escrow/impound account for taxes and insurance.

Trap: A thank-you gift, marketing fee, or split fee tied to referrals (not actual work) violates RESPA's anti-kickback rule even if both parties consider it routine.

TILA: Truth in Lending Act

TILA (implemented by Regulation Z) makes the cost of credit transparent so borrowers can compare loans. It requires disclosure of the finance charge, the annual percentage rate (APR), the amount financed, and the total of payments.

The APR expresses the total cost of credit as a yearly rate — it includes the note's interest plus certain finance charges (points, some fees). Because it bundles those costs, the APR is normally higher than the nominal note rate. A loan advertised at a 6.0% note rate may carry a 6.3% APR. Borrowers who compare only the note rate may pick a loan that is actually more expensive once points and fees are folded in, which is precisely the comparison TILA forces lenders to disclose.

TILA advertising and rescission

TILA's trigger terms in advertising require full disclosure. If an ad states a specific term — such as the down payment amount, the number of payments, the payment amount, or the finance charge — it must also disclose the APR, the down payment, the terms of repayment, and similar details. A vague ad ("low rates available") has no trigger; a specific ad ("$1,200/month for 360 months") does.

For certain refinances and home-equity loans on a primary residence, TILA grants a 3-business-day right of rescission. (This rescission right does not apply to a purchase-money loan to buy the home.)

ECOA: Equal Credit Opportunity Act

ECOA prohibits discrimination in any aspect of a credit transaction based on a protected class. Memorize the list:

• Race or color
• Religion
• National origin
• Sex (including sexual orientation/gender identity per CFPB guidance)
• Marital status
• Age (provided the applicant can contract)
• Receipt of income from public assistance

Trap: ECOA's classes overlap with the federal Fair Housing Act but are not identical. ECOA adds marital status, age, and public-assistance income, which the Fair Housing Act does not list. ECOA governs credit; Fair Housing governs housing transactions.

TRID: the combined disclosure rule

TRID (the TILA-RESPA Integrated Disclosure rule) merged the old RESPA and TILA forms into two consumer-facing documents administered by the CFPB.

The 3-day CD waiting period exists so the borrower can compare the final terms against the Loan Estimate before signing. Certain changes — an APR increase beyond tolerance, a switch to a prepayment penalty, or a change in loan product — restart the 3-day clock. Routine minor changes do not.

Trap: Confuse the two windows and you will miss points. The Loan Estimate is 3 days after application; the Closing Disclosure is 3 days before closing. One looks forward from application, the other looks backward from the closing table.

Other federal laws on the financing edge

A few additional federal statutes round out the financing-regulation domain:

• CAN-SPAM / Do-Not-Call rules touch how lenders and agents may solicit borrowers, but the heavyweight tested laws remain RESPA, TILA, ECOA, and TRID.
• The Fair Credit Reporting Act (FCRA) governs how credit information is collected, used, and disputed. A borrower denied credit is entitled to an adverse-action notice and the reasons.
• The Dodd-Frank Act created the Consumer Financial Protection Bureau (CFPB), the agency that now writes and enforces TRID, and added the ability-to-repay rule and qualified-mortgage standards that bar lenders from approving loans a borrower clearly cannot repay.

How these interlock on the exam

A single fact pattern can implicate several laws at once. Suppose a lender pays an agent a referral fee, advertises a specific monthly payment without the APR, and declines an applicant because she receives public-assistance income. That one scenario violates RESPA (kickback), TILA (trigger-term advertising), and ECOA (public-assistance discrimination) simultaneously.

The exam expects you to match each act to its purpose: RESPA polices settlement-service fees and kickbacks, TILA polices cost-of-credit disclosure and advertising, ECOA polices who may be denied credit, and TRID polices the timing and content of the LE and CD. Keep those four lanes distinct and most questions resolve quickly.