QUICK ANSWER
Three federal laws govern mortgage lending, and the exam wants you to tell them apart. RESPA covers settlement costs and bans kickbacks and referral fees. TILA, through Regulation Z, forces lenders to disclose the true cost of credit, including the APR, and gives a 3-day right of rescission on refinances but not purchase loans. ECOA, through Regulation B, bans discrimination in lending based on protected classes like race, sex, marital status, age, and public-assistance income. All three are enforced by the CFPB.
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This guide explains federal lending laws for the Texas sales agent exam. It is educational content, not legal or lending advice. These laws and their enforcing rules change, and some details are technical. Confirm the primary CFPB sources below and work under your broker before you rely on any point.
Federal lending laws are pure memorization points, and the exam loves them because they are easy to test. The trick is not confusing the three. Each one does a different job: RESPA is about settlement costs, TILA is about disclosing credit costs, and ECOA is about fair access to credit. This spoke sits under the types of mortgages and loans pillar.
Learn what each law protects, and the questions answer themselves. Let us take the three in turn, then contrast ECOA with the Fair Housing Act, which is a classic trap.
What are the three main federal lending laws?
Snippet answer: Three federal laws dominate mortgage lending. RESPA, the Real Estate Settlement Procedures Act of 1974, governs settlement costs and bans kickbacks. TILA, the Truth in Lending Act of 1968, implemented by Regulation Z, requires disclosure of the cost of credit. ECOA, the Equal Credit Opportunity Act of 1974, implemented by Regulation B, bans discrimination in lending. All three are now enforced by the Consumer Financial Protection Bureau.
Start with a map of the three, because half the exam questions just ask which law does what.
| Law | What it does | Regulation |
|---|---|---|
| RESPA (1974) | Governs settlement costs, bans kickbacks | Regulation X |
| TILA (1968) | Requires disclosure of the cost of credit | Regulation Z |
| ECOA (1974) | Bans discrimination in credit | Regulation B |
Two facts apply to all three. Each has a lettered regulation that carries it out, and it helps to pair them: RESPA with X, TILA with Z, ECOA with B. And all three are enforced today by the Consumer Financial Protection Bureau, the CFPB, which took over the job when it was created. Now take each law on its own.
RESPA: settlement costs and no kickbacks
Snippet answer: RESPA, the Real Estate Settlement Procedures Act, applies to federally related mortgage loans and governs the settlement or closing process. Its most tested rule is Section 8, which bans kickbacks, referral fees, and unearned fees for referring settlement-service business. RESPA also bars a seller from requiring the buyer to use a particular title insurance company, and it requires standardized cost disclosures at application and closing.
RESPA is about the closing table. It applies to federally related mortgage loans, which covers most residential mortgages, and its goal is to keep settlement costs honest and transparent.
The rule the exam cares about most is Section 8. It prohibits giving or accepting any fee, kickback, or thing of value in exchange for referring settlement-service business. An agent cannot take a payment for steering clients to a particular lender, title company, or inspector. The penalties are stiff, including criminal fines and up to a year in prison, plus civil liability of up to three times the improper charge. RESPA also bars a seller from requiring the buyer to buy title insurance from a specific company, and it mandates the standardized disclosures now delivered through the Closing Disclosure and TRID process.
TILA and Regulation Z: the cost of credit
Snippet answer: TILA, the Truth in Lending Act, is carried out by Regulation Z. It requires lenders to disclose the true cost of credit so borrowers can compare loans. The two headline disclosures are the finance charge, the total dollar cost of the credit, and the annual percentage rate, or APR, which expresses that cost as a yearly rate. TILA does not set interest rates. It only forces honest disclosure of them.
TILA is about disclosure, not price control. It does not tell a lender what to charge. It forces the lender to reveal the cost clearly, so a borrower can shop and compare on equal footing. Regulation Z is the rule that implements it.
The two disclosures to remember are the finance charge and the APR. The finance charge is the total dollar amount the credit costs the borrower over the loan. The APR restates that cost as an annual percentage, folding in certain fees, so it is usually higher than the note rate. Because the APR captures more than the interest rate alone, it is the number TILA pushes borrowers to compare. Do not confuse the APR with the simple interest rate on the note.
The TILA right of rescission
Snippet answer: TILA gives a borrower a three-business-day right of rescission, a right to cancel, on certain loans secured by their primary residence, such as a refinance or a home-equity loan. It does not apply to loans used to purchase a home. So a buyer financing a new house has no three-day cancellation right, but an owner refinancing their existing home does. This distinction is heavily tested.
The right of rescission is the most misunderstood piece of TILA, so get it exactly right. When a borrower takes certain loans against their principal residence, they get three business days to cancel the transaction with no penalty. The classic examples are a refinance and a home-equity loan.
The trap is the exception. The rescission right does not apply to a loan used to buy the home. A purchaser getting a mortgage to acquire a house cannot rescind under TILA, because you cannot unwind a purchase that easily. So the rule splits cleanly: refinance or home equity on a primary residence gets three days, a purchase loan does not. Remember it as refinance yes, purchase no.
RESPA versus TILA versus ECOA is exactly the kind of sorting the exam tests. Run the free financing and settlement question set to drill the differences.
Regulation Z advertising and trigger terms
Snippet answer: Regulation Z also controls how credit is advertised. If an ad states a trigger term, like a specific down payment, a monthly payment amount, the number of payments, or the finance charge, it must then disclose the full terms, including the down payment, the repayment terms, and the APR. Stating only the APR is allowed on its own. The rule stops ads from teasing one attractive number while hiding the real cost.
Advertising rules are a smaller but tested corner of Regulation Z. The idea is that a lender cannot advertise one appealing detail while hiding the rest. Certain specifics, called trigger terms, set off a duty to disclose the full picture.
The trigger terms are a specific down payment amount, a specific monthly payment, the number of payments or the loan term, and the finance charge. Mention any of those in an ad, and the ad must also state the down payment, the repayment terms, and the APR. There is one friendly exception: an advertiser may state the APR by itself without triggering the full disclosure, because the APR is the honest comparison number the law wants front and center.
ECOA and Regulation B: fair access to credit
Snippet answer: ECOA, the Equal Credit Opportunity Act, implemented by Regulation B, bans discrimination in any credit transaction. A creditor may not discriminate based on race, color, religion, national origin, sex, marital status, or age, or because an applicant receives public-assistance income or has exercised a consumer-credit right in good faith. ECOA covers all credit, not just housing, which makes it broader than the Fair Housing Act.
ECOA guarantees fair access to credit. Regulation B carries it out, and it prohibits discrimination in any part of a credit transaction, from the application to the terms offered.
Memorize the protected bases, because the exam lists them. A creditor may not discriminate on the basis of race, color, religion, national origin, sex, marital status, or age, provided the applicant has the capacity to contract. It also may not discriminate because an applicant receives income from a public-assistance program, or because the applicant exercised a right under the federal consumer-credit laws in good faith. The inclusion of marital status, age, and public-assistance income is what distinguishes the ECOA list from other fair-housing lists.
ECOA versus the Fair Housing Act
Snippet answer: ECOA and the Fair Housing Act both ban discrimination, but they cover different ground. The Fair Housing Act covers housing, including the sale and rental of homes, and its classes include familial status and disability. ECOA covers credit of all kinds and adds marital status, age, and public-assistance income. A lending discrimination question can implicate both laws, so watch which one the facts point to.
This contrast is a favorite trap, so hold the two lists side by side. Both laws fight discrimination, but the Fair Housing Act is about housing, while ECOA is about credit.
| Feature | Fair Housing Act | ECOA |
|---|---|---|
| Covers | Housing: sale, rental, and related | Credit of all kinds |
| Notable classes | Familial status, disability | Marital status, age, public assistance |
| In a mortgage | Applies to the housing transaction | Applies to the credit decision |
Because a mortgage is both a housing transaction and a credit transaction, both laws can apply at once. If a question is about being denied a loan because of marital status or age, that points to ECOA. If it is about familial status or disability in housing, that points to the Fair Housing Act. Reading which fact the question emphasizes is how you pick.
How to study federal lending laws
Snippet answer: Study the three laws by their one-word jobs: RESPA is settlement costs, TILA is disclosure, ECOA is fair access. Pair each with its regulation, X, Z, and B. Then nail the three most-tested details: RESPA Section 8 bans kickbacks, TILA gives a three-day rescission on refinances but not purchases, and ECOA adds marital status, age, and public assistance to the protected classes.
Do not blur the three together. Give each a single label, attach its regulation letter, and learn its signature rule. RESPA equals kickbacks and settlement. TILA equals APR and the three-day rescission. ECOA equals protected classes in credit.
Keep this spoke tied to its neighbors. The Closing Disclosure and TRID spoke shows how RESPA and TILA disclosures merged, and the types of mortgages and loans pillar frames the loans these laws regulate.
Frequently asked questions
What is the main purpose of RESPA? RESPA governs the settlement or closing process for federally related mortgage loans and keeps settlement costs transparent. Its most tested provision is Section 8, which bans kickbacks, referral fees, and unearned fees for referring settlement-service business. It also requires standardized cost disclosures and bars a seller from requiring the buyer to use a specific title company.
Who gets the three-day right of rescission under TILA? A borrower taking certain loans against their primary residence, such as a refinance or a home-equity loan, gets three business days to cancel. It does not apply to a loan used to purchase a home. So a buyer financing a new house has no three-day cancellation right, while an owner refinancing an existing home does.
What is the difference between the interest rate and the APR? The interest rate is the rate charged on the note. The APR, the annual percentage rate, expresses the total cost of the credit as a yearly rate, folding in certain fees on top of interest. Because it captures more than interest alone, the APR is usually higher than the note rate, and TILA pushes it as the honest number for comparing loans.
How is ECOA different from the Fair Housing Act? ECOA bans discrimination in credit of all kinds and includes marital status, age, and public-assistance income among its protected bases. The Fair Housing Act bans discrimination in housing and includes familial status and disability. A mortgage is both a credit and a housing transaction, so both laws can apply, and the facts of a question tell you which one is in play.
Practice questions
1. A real estate agent accepts a monthly payment from a title company in exchange for steering closings to that company. Which law does this most directly violate? A. TILA B. RESPA Section 8 C. ECOA D. Regulation Z
Answer: B. RESPA Section 8 bans kickbacks and referral fees for settlement-service business, which is exactly what this payment is. TILA and Regulation Z address credit-cost disclosure (A and D), and ECOA addresses discrimination in credit (C).
2. A homeowner refinances the mortgage on their primary residence. Under TILA, they generally have: A. No right to cancel once signed B. A three-business-day right of rescission C. A 30-day right to cancel D. A right to cancel only if the lender agrees
Answer: B. A refinance on a primary residence carries a three-business-day right of rescission under TILA. That right does not extend to purchase loans, but it does apply here because this is a refinance, not a purchase.
3. Which basis for denying a loan is protected specifically under ECOA? A. The applicant's credit score B. The applicant's debt-to-income ratio C. The applicant's marital status D. The value of the collateral
Answer: C. ECOA prohibits credit discrimination based on marital status, along with race, color, religion, national origin, sex, age, and receipt of public assistance. Credit score, debt-to-income ratio, and collateral value are legitimate underwriting factors, not protected bases.
4. An ad states, "Only $2,000 down and $1,200 a month." Under Regulation Z, the ad must now also disclose: A. Nothing further, because the numbers are accurate B. The full terms, including the repayment terms and the APR C. Only the lender's name D. Only the property address
Answer: B. Stating a specific down payment and monthly payment are trigger terms under Regulation Z, so the ad must disclose the full terms, including the down payment, repayment terms, and APR. Accurate numbers alone do not satisfy the rule (A).
Sources and methodology
This guide was written from primary federal sources and reverified on July 21, 2026. These laws and their implementing rules are periodically amended, so confirm the current rule text before relying on a technical detail.
- The RESPA scope, the Section 8 kickback ban, the thing-of-value definition, and the penalties come from the Real Estate Settlement Procedures Act and its Regulation X, enforced by the CFPB.
- The TILA disclosure requirements, the finance charge and APR, the three-day right of rescission on non-purchase loans secured by a principal residence, and the advertising trigger terms come from the Truth in Lending Act and Regulation Z.
- The ECOA prohibited bases of discrimination come from the Equal Credit Opportunity Act and Regulation B. Regulation B is periodically amended by the CFPB, so confirm the current rule for any enforcement-level detail.
- The Fair Housing Act classes used for the contrast come from the federal Fair Housing Act.
Verify all lending-law details against the current CFPB rules before you rely on them in practice.
Official source links
- CFPB, Real Estate Settlement Procedures Act (RESPA)
- CFPB, Truth in Lending Act (Regulation Z)
- CFPB, Equal Credit Opportunity Act (Regulation B)
- HUD, Fair Housing Act
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This article is exam-prep education for the Texas real estate sales agent license. It is not legal or lending advice, and it does not create an agency relationship. Federal lending laws and their implementing regulations change and depend on the specific transaction. Always confirm the current CFPB and HUD sources and work under the supervision of your sponsoring broker before acting.