Most mortgage borrowers don't know their rights until something goes wrong. That's a problem, because your rights are most useful before you're in trouble - not after. Understanding what the law requires lenders to give you, what protections kick in automatically, and what you can do when those protections are violated gives you genuine leverage throughout the borrowing process. This guide covers the rights that matter most.
Right to a Loan Estimate
Under TILA and RESPA, you have the right to receive a Loan Estimate within three business days of submitting a complete mortgage application. The Loan Estimate is a standardized three-page document showing the loan amount, interest rate, projected monthly payment, estimated total closing costs itemized by category, and a summary of key loan features including whether the rate can rise, whether the loan has a prepayment penalty, and whether the loan has a balloon payment.
The Loan Estimate exists specifically to enable comparison shopping. You can get Loan Estimates from multiple lenders and compare them side by side on an apples-to-apples basis because every lender uses the same form. If a lender refuses to provide a Loan Estimate, discourages you from shopping around, or tells you there's no time to compare options, those are red flags worth taking seriously.
Once you receive a Loan Estimate, you have at least 10 business days to decide whether to proceed - you don't have to accept the loan or even respond within that window. If a lender pressures you to commit immediately upon receiving a Loan Estimate, that pressure is itself a warning sign.
Right to a Closing Disclosure
You must receive a Closing Disclosure at least three business days before closing. This document shows the final loan terms and actual closing costs in the same standardized format as the Loan Estimate, which makes comparison straightforward. If anything on the Closing Disclosure differs from the Loan Estimate - in the loan terms, the interest rate, or the fees charged - you have the right to ask for an explanation before you sign.
Some fees are locked between the Loan Estimate and Closing Disclosure and cannot change at all. These include lender origination charges, transfer taxes, and fees for services where the lender required you to use a specific provider. Other fees can increase by up to 10%. And some fees - like prepaid interest based on the actual closing date - can vary without limit. If a locked fee increased on your Closing Disclosure without explanation, the lender may be required to credit you the difference.
Take the three business days before closing seriously. Read the Closing Disclosure. Compare it to your Loan Estimate line by line. If something changed that shouldn't have changed, raise it with the lender before you close. Your signature at closing represents your agreement to the terms as written in those final documents.
Right of Rescission on Refinances
When you refinance your primary residence, you have three business days after closing to cancel the loan without penalty or cost. This is the right of rescission under TILA, codified at 15 U.S.C. ยง 1635. It applies automatically - the lender must provide you with a notice of this right at closing, and the clock starts running from the date of closing or the date you receive the required disclosures, whichever is later.
To exercise your right of rescission, you must notify the lender in writing within the three-business-day window. The written notice should clearly state that you are rescinding the transaction. Once you rescind, the lender has 20 days to return any money you've paid and release any lien on your property. The loan is cancelled as if it never happened.
Important limitations: the right of rescission does not apply to purchase money mortgages, meaning the loan you use to originally buy a home. It does not apply to investment property refinances. It applies specifically to refinances of your primary residence. If you're not sure whether your rescission right applies to your specific transaction, get written confirmation from your lender or consult an attorney before closing day passes.
Certain material TILA violations can extend the right of rescission up to three years after the date of the loan. If you believe you were never given the required notices, or the disclosures you received were materially inaccurate, that extended rescission right may still be available. This is a claim worth evaluating with an attorney if you're in a bad refinance and looking for legal options.
Right to HUD Counseling
HUD-approved housing counselors provide free or low-cost advice to borrowers at all stages of the mortgage process. For first-time homebuyers, HUD counseling helps you understand the loan process, compare loan offers, and prepare for the financial responsibilities of homeownership. For borrowers in or approaching financial difficulty, HUD counselors can explain your options, help you communicate with your servicer, and assist with applications for loan modification programs.
For high-cost loans classified under HOEPA, HUD counseling is mandatory before the loan can close. The lender must provide you with a list of HUD-approved counselors and give you a reasonable opportunity to receive counseling before the closing date. If a lender rushed you through a high-cost loan without offering or requiring counseling, that's a procedural violation worth documenting.
You can find a HUD-approved housing counselor at hud.gov/counseling. These are independent advisors - not lender employees - and their job is to serve your interest, not to help the lender close the transaction. For any significant mortgage decision, particularly refinances, reverse mortgages, or modifications, an hour with a HUD counselor can prevent very expensive mistakes.
RESPA Protections Against Kickbacks
Section 8 of RESPA prohibits kickbacks, referral fees, and unearned fee-splitting between settlement service providers. In plain terms: no one involved in the settlement of your mortgage transaction can pay another person or entity for referring your business to them unless actual services were provided in exchange.
This matters in practice because many borrowers don't realize the extent to which service providers in a mortgage transaction are financially connected to each other. Real estate agents referring buyers to affiliated title companies, lenders steering borrowers to captive appraisal management companies, builders directing buyers to in-house mortgage operations - these arrangements are common and many cross the line into RESPA violations when undisclosed fees are exchanged without corresponding services.
As a borrower, you have the right to select your own title company, attorney, inspector, and other settlement service providers. A lender can provide you with an "affiliated business arrangement" disclosure when recommending services from affiliated providers, but you are never required to use the recommended provider for services where you have a choice. Choosing your own providers breaks the referral loop and often reduces costs.
Fair Lending Protections
Two major federal laws protect borrowers against discrimination in mortgage lending. The Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance in any aspect of a credit transaction. The Fair Housing Act (FHA) prohibits discrimination in residential real estate transactions - including lending - based on race, color, national origin, religion, sex, familial status, or disability.
Fair lending protections cover every part of the lending process: whether you're approved, what terms you're offered, how you're treated during the application, and whether you're steered toward higher-cost products than your creditworthiness would warrant. Steering is a particularly insidious form of lending discrimination. It doesn't require the lender to deny your application; it simply means directing you to a subprime, high-cost, or otherwise less favorable product when you qualified for something better - because of your race, national origin, or another protected characteristic.
Michigan's Elliott-Larsen Civil Rights Act provides additional state-level protections against discrimination in real estate transactions, including lending. Michigan law covers some characteristics not included in federal law. If you believe you were treated differently in a mortgage transaction because of a protected characteristic, you can file complaints with HUD, the CFPB, the Michigan Department of Civil Rights, and potentially sue in federal or state court.
Servicing Rights
Once your loan is originated, you deal primarily with your loan servicer, which may or may not be the same company that made you the loan. RESPA and other regulations govern what servicers can and cannot do. Key servicer obligations include: crediting payments on the day they're received (not the day they're processed), responding to qualified written requests within specific timeframes, providing accurate account statements, not assessing fees that aren't authorized under your loan documents, maintaining escrow accounts accurately, and following proper foreclosure procedures.
If your servicer fails to credit payments properly, you can send a qualified written request - a written letter clearly identified as a QWR - asking for your complete payment history and an explanation of any discrepancies. The servicer must acknowledge your QWR within five business days and provide a substantive written response within 30 business days (with a possible 15-day extension if they notify you in writing). A servicer who ignores or improperly responds to a QWR violates RESPA and may owe you actual damages and statutory damages.
If your servicer initiates foreclosure improperly - before providing required notices, without following Michigan's statutory procedures, or on the basis of erroneous default claims - those are grounds to challenge the foreclosure. Michigan's foreclosure by advertisement statute requires specific publication timelines and notice procedures that servicers must follow precisely.
Right to Know Why You Were Denied
Under ECOA, if you're denied credit, the lender must provide you with an adverse action notice within 30 days. The notice must explain the specific reasons for the denial or tell you that you have the right to request those reasons. It must also identify any consumer reporting agency whose report was a factor in the decision. This information tells you exactly what to work on to improve your creditworthiness and gives you the basis to check whether the information used was accurate.
Review your credit reports after any denial. You are entitled to a free copy of any credit report used in an adverse credit decision. If the report contains errors that contributed to the denial, dispute them directly with the credit bureau and re-apply once the errors are corrected. If the denial was based on factors you believe were discriminatory rather than creditworthiness-based, that's grounds for a fair lending complaint.
What to Do When Your Rights Are Violated
Lenders and servicers violate borrower rights more often than most borrowers realize, and the violations often go unchallenged simply because borrowers don't know what they're entitled to. If you believe your rights were violated, the path forward involves three parallel tracks.
First, document the violation. Gather your loan documents, disclosures, correspondence, and payment history. Write out a clear, chronological account of what was required, what actually happened, and how the difference harmed you.
Second, file regulatory complaints. The CFPB at consumerfinance.gov handles federal consumer financial law violations. Michigan DIFS at michigan.gov/difs handles violations by Michigan-licensed entities. The Michigan Attorney General handles deceptive business practices. Filing with all three is appropriate when you have a substantive complaint.
Third, consult a consumer protection attorney. Federal and state laws that protect borrowers generally include fee-shifting provisions - meaning that if you prevail in litigation, the lender may be required to pay your legal fees. For violations involving real financial harm, a private lawsuit may be economically viable even when the dollar amount of your direct damages seems modest, because of these fee-shifting provisions and statutory damage awards available under TILA, RESPA, and the MCPA.
Coventry Enterprises helps borrowers understand and exercise their rights. Related: predatory lending laws and Michigan lending regulations.