What does a lender violate if they fail to provide a loan estimate of closing costs within 3 days of application?

The lender's failure to provide a loan estimate of closing costs within three days of application violates RESPA, which stands for the Real Estate Settlement Procedures Act. This federal law mandates that lenders must furnish potential borrowers with a loan estimate to promote transparency about costs involved in closing transactions. The intent behind RESPA is to enable borrowers to understand and compare the costs associated with their mortgage loans, thus preventing surprises at closing.

While the Truth in Lending Act (TILA) does require lenders to disclose key loan terms and costs, including the APR (annual percentage rate), it does not specifically concern itself with the timing of loan estimates in the same manner as RESPA. The timelines outlined by RESPA are crucial to ensuring borrowers are informed about the costs before they proceed with their loan commitment, supporting the overall goal of creating a more informed borrowing process.

Other regulatory frameworks, such as FHA Guidelines and the Dodd-Frank Act, involve broader aspects of lending practices and consumer protections. However, it is specifically RESPA that addresses the timely provision of a loan estimate for closing costs, making it the correct framework for this particular situation.