RESPA Compliance and Advance Fee Statement
Now, a word on RESPA and Advance Loan Fee: Section 8 of RESPA prohibits a person from giving or accepting anything of value for referrals of settlement service business related to a federally related mortgage loan. It also prohibits a person from giving or accepting any part of a charge for services that are not performed. Basically, the payment and receipt of a “referral fee” for sending referral business from one real estate practitioner to another is not allowed. In the case of Home Sweet Home, RESPA does not apply. Here’s why:
Not A Referral Fee
Second, the service of advice, education, and guidance are being rendered (and is invaluable) to a person who cannot qualify for any loan (much less a conventional or subprime loan with favorable parameters). Since valuable services are rendered in lieu of “services that are not performed” RESPA does not and cannot apply. Finally, upon enrolling into to the Home Ownership Program, it is usually too early to ascertain whether a person may or may not qualify for a “federally regulated mortgage” and if such qualification is a “good fit” without first making credit and financial historical review of the borrower’s background. Again, RESPA cannot be applied under such unsure circumstances.
Not Advance Loan Fee
Finally, payment of the Home Ownership Program is the payment of advising, guidance and education services. Therefore, since payment is for a program to assist for eventually qualifying for a home loan, it cannot be considered as an “advance loan fee” In conclusion, since Home Sweet Home is NOT in the lending business but rather the “general financial advising, guidance and education business” Home Sweet Home cannot be considered a lender. Home Sweet Home recognizes legitimate lenders often charge application, appraisal, or credit report fees.
The differences? They disclose their fees clearly and prominently; they take their fees from the amount you borrow, and the fees usually are paid to the lender or broker after the loan is approved. Home Sweet Home conspicuously discloses all fees on the Home Sweet Home Enrollment form as payment for the Home Ownership Program and therefore DOES NOT constitute an advance loan fee.
Settlement Statement Disclosure: The Home Ownership Program was primarily designed as a “preparation program” for home loan borrowers. The loan officer or real estate agent, may - at their own discretion - include the Home Ownership Program via Home Sweet Home (as a pre-paid cost) on the Settlement Statement (HUD 1 - as applicable).
Additionally, and where possible and for ethical business purposes, a real estate agent or loan officer who refers a paying client to Home Sweet Home, should disclose the fact that, upon remittance of payment to Home Sweet Home, the loan officer or agent will be earning a commission as a Home Sweet Home 250 Affiliate.