Federal Mortgage-Related Laws
What you must know
Five statutes carry most of the federal questions. TILA / Regulation Z governs disclosure of the APR and finance charge, the right of rescission, advertising rules, and the ability-to-repay/qualified mortgage framework. RESPA / Regulation X governs settlement services, the Loan Estimate and Closing Disclosure under TRID, escrow account limits, servicing transfer notices, and the anti-kickback rule in Section 8. ECOA / Regulation B prohibits discrimination in credit, sets adverse-action timing, and requires notice of incompleteness. HMDA requires collection and reporting of application data. The SAFE Act created NMLS licensing. Layer on the Fair Housing Act, FCRA, GLBA privacy, HOEPA high-cost mortgage limits, the Flood Disaster Protection Act, and appraisal independence rules under ECOA.
Traps
- Rescission applies to refinances and home-equity loans on a principal dwelling - never to a purchase or to new-money advances.
- The rescission clock is three business days, and Saturday counts as a business day for this purpose, unlike the definition used for some other rules.
- ECOA adverse action is 30 days after a completed application; Regulation B allows a notice of incompleteness within the same 30 days.
- Section 8 prohibits fees for referrals, not fees for goods or services actually performed.
Rule of thumb
If a fact pattern involves a fee paid to a party who did nothing but refer the borrower, think RESPA violation, not a tolerance issue.
Worked example
A borrower refinances her primary residence and signs on a Monday. The three-business-day rescission period runs through midnight Thursday, provided all disclosures were correct and delivered. If the APR was understated beyond tolerance, rescission can extend up to three years.