NMLS Exam: The 4 Federal Laws You Must Know (TILA, RESPA, ECOA, HMDA)
TILA, RESPA, ECOA, HMDA — these four federal laws account for the largest portion of failures on the NMLS SAFE Act exam. Here's what each covers, how they differ, and the scenarios that appear most often.
Why Federal Laws Fail So Many NMLS Candidates
Federal mortgage-related laws make up a large portion of the NMLS SAFE Act exam — and they're the section that fails the most candidates. Not because the laws are impossible to learn, but because they overlap in confusing ways. A candidate who has memorized the name of each law can still fail if they can't identify which law governs a specific scenario in real time. This guide breaks down the four core federal laws the way the exam actually tests them — by situation, not by statute.
TILA — Truth in Lending Act
TILA requires lenders to disclose the cost of credit in standardized terms so borrowers can compare loan offers. Key exam terms: APR (the all-in yearly cost of the loan), finance charge (total dollar cost of the loan), and the right of rescission (borrowers have 3 business days to cancel certain refinance transactions on their primary residence). The 3-day rescission clock starts from the latest of: loan closing, delivery of the TILA disclosure, or delivery of the rescission notice. TILA does not apply to purchase transactions — only refinances on a primary residence trigger the right of rescission.
RESPA — Real Estate Settlement Procedures Act
RESPA governs residential mortgage settlement procedures and prohibits kickbacks and unearned fees between settlement service providers. Section 8 of RESPA makes it illegal to give or accept anything of value for referrals of settlement services — this includes cash, gifts, and meals above a nominal value. The exam commonly tests: a title company giving gifts to agents for referrals (RESPA Section 8 violation), and what disclosures are required at application (Loan Estimate within 3 business days). Know the exceptions: normal advertising, bona fide payments for services actually performed, and employer-employee relationships.
ECOA — Equal Credit Opportunity Act
ECOA prohibits discrimination in credit decisions based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance income. The exam tests ECOA through adverse action scenarios: if a lender denies a loan, they must provide a written notice within 30 days stating specific reasons. ECOA applies to all creditors — not just mortgage lenders. Critical distinction the exam tests: ECOA protects marital status and age as classes. The Fair Housing Act does not include marital status. If the question is about mortgage lending and discrimination, both laws may apply — know which one adds which protected class.
HMDA — Home Mortgage Disclosure Act
HMDA requires most mortgage lenders to collect, report, and publicly disclose data about mortgage applications and loans — including applicant race, ethnicity, sex, income, loan amount, and property location. Its purpose is to identify discriminatory lending patterns and ensure lenders are serving their communities. The most commonly tested fact on the exam: HMDA does not prohibit discrimination. It creates transparency so regulators can detect it. ECOA and the Fair Housing Act prohibit discrimination. HMDA only requires reporting. Candidates who confuse these laws fail questions where the scenario describes a lender collecting data — that's HMDA compliance, not ECOA.