Is a mortgage broker permitted to receive a yield spread premium on a loan?
A yield spread premium (YSP) is additional compensation paid to a mortgage broker as compensation for placing a higher-interest loan with a borrower. In 2010, the Dodd-Frank Act banned the practice of the YSP.
Who pays the yield spread premium?
mortgage lender
The “yield spread premium,” or YSP as it’s known in the industry, is the fee (commission) paid by the mortgage lender to the broker in exchange for a higher interest rate, or an above market mortgage rate.
What do yield spread premiums compensate?
YSP allows the customer to finance part of their broker’s compensation as part of the mortgage loan. The customer agrees to pay a higher interest rate on the loan. In return for that higher interest rate, the lender agrees to pay the broker compensation in cash at or shortly after the closing.
What is a yield spread loan?
The yield spread premium is a fancy term for the compensation that a mortgage broker may receive from the mortgage lender for selling an interest rate that is above the lender’s par rate for which the borrower qualifies.
What is yield spread in real estate?
The difference between the par rate and the actual rate that you get is called a “yield spread.” The yield spread premium serves as a premium provided by a wholesale mortgage lender to the broker or loan officer as an incentive to sell you a loan that has a higher interest rate than the par rate for which you qualify.
What does spread mean in mortgage?
Mortgage spread represents the difference in interest rate between the 10-year United States Treasury bill and the average rate on a 30-year mortgage. Typically, mortgage rates remain about 1.5 percent above the rates being paid on 10-year Treasuries.
What is the difference between section 32 and 35?
HOEPA Section 32 loans must also meet the same APR and APOR criteria as Section 35 loans, but Section 32 loans also include these three additional criteria, which do not apply to Section 35 loans: Total lender/broker points and fees are greater than 5 percent of the total loan amount.
What is a premium spread?
A yield spread premium (YSP) is the money or rebate paid to a mortgage broker for giving a borrower a higher interest rate on a loan in exchange for lower up front costs, generally paid in origination fees, broker fees or discount points.
How banks make money with interest rate spread?
A bank earns money from interest it receives on loans and other assets, and it pays out money to customers who make deposits into interest-bearing accounts. The ratio of money it receives to money it pays out is called the bank spread. The bank spread can indicate a bank’s profit margin.
