New Jersey Real Estate Salesperson · Real Estate Finance
Federal Lending Laws
On this page 6 sections
In 30 seconds
Federal lending laws make credit costs visible, keep settlement charges honest, and forbid discrimination in lending. The distinction most tested is that TILA and Regulation Z govern disclosure of the cost of credit, while RESPA governs settlement services and bans kickbacks for referrals.
Why this matters
Exam questions hide the answer in which law is named, so a licensee who cannot tell TILA's cost disclosures from RESPA's kickback ban will pick the wrong statute.
The college version
In normal terms
- TILA and Regulation Z require lenders to disclose the true cost of credit, including the annual percentage rate, and control how credit terms are advertised.
- RESPA governs closing on federally related residential loans, requires settlement-cost disclosures, and prohibits kickbacks or unearned fees for referring settlement business.
- TRID merges the two laws' forms into the Loan Estimate and the Closing Disclosure, while ECOA, FCRA, and HMDA protect borrowers from discrimination and misuse of credit data.
Concepts in this outline
- Truth in Lending Act / Regulation Z — requires disclosure of the true cost of credit, including the APR, and regulates trigger terms in credit advertising.
- TILA-RESPA Integrated Disclosure rule — combines TILA and RESPA disclosures into two standardized forms for most residential mortgage loans.
- Loan Estimate — early disclosure of estimated loan terms and closing costs, given shortly after application.
- Closing Disclosure — final statement of loan terms and costs, delivered three business days before closing.
- Real Estate Settlement Procedures Act — governs settlement on federally related residential loans, requiring cost disclosures and banning referral kickbacks.
- Prohibited kickbacks and referral fees — no one may give or receive a fee simply for referring settlement-service business.
- Settlement-service disclosures — borrowers must receive information about settlement costs and any affiliated business arrangements.
- Equal Credit Opportunity Act — bars lenders from discriminating in credit decisions on protected bases such as race, sex, marital status, age, or public assistance income.
- Fair Credit Reporting Act — regulates consumer credit reports, giving borrowers rights to accuracy, privacy, and notice of adverse action.
- Fair Housing Act lending implications — discrimination in mortgage lending on a protected basis is a fair-housing violation (see Topic 10).
- Home Mortgage Disclosure Act — requires lenders to collect and report mortgage data so regulators can detect discriminatory lending patterns.
- Redlining and steering concerns — refusing loans in an area, or steering borrowers to worse loans, based on protected class (see Topic 10).
- Predatory lending principles — abusive practices such as excessive fees, loan flipping, and loans a borrower clearly cannot repay.
Eli explains
The same idea, in plain words
Explain it like I’m 10
Borrowing money comes with a hidden price tag, so federal laws force the tag into the open. The Truth in Lending Act, carried out by Regulation Z, makes lenders state the cost of credit as an annual percentage rate and polices advertising: an ad stating a trigger term such as the monthly payment must disclose the other terms too.
The Real Estate Settlement Procedures Act watches the closing table. It requires settlement-cost disclosures and bans kickbacks, any fee paid just for referring a borrower to a lender, title company, or other settlement provider. A licensee cannot accept a thank-you payment for a referral.
The TILA-RESPA Integrated Disclosure rule combines both laws' paperwork into two forms: the Loan Estimate, given shortly after application, and the Closing Disclosure, delivered three business days before closing.
Fairness laws finish the set. The Equal Credit Opportunity Act forbids credit discrimination. The Fair Credit Reporting Act protects credit-report accuracy. The Home Mortgage Disclosure Act makes lenders report data so neglected areas show up. Predatory lending means loans built to trap borrowers.
Worked example
Rashida is a licensee helping the Okafors buy a Montclair Victorian. A mortgage broker offers her a referral bonus for every buyer she sends over; she declines, because RESPA forbids that kickback. The Okafors receive a Loan Estimate shortly after applying, comparing the APR and fees against another lender's estimate under TILA. Three business days before closing they receive the Closing Disclosure and spot a fee that changed, giving them time to ask. When the lender asks Adaeze Okafor whether she plans to have children, Rashida recognizes an ECOA problem and reports it to her broker. The loan closes with every cost on the table and no hidden favors.
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