Are Yield Spread Premiums Kickbacks?
by Henry Savage Question: I have read a lot of controversy about “yield spread premiums” and how some people say they are really nothing but back door kickbacks from a lender. It seems to me that if a mortgage broker charges a borrower a one percent origination fee and also receives a one percent fee from the lender, he’s getting paid too much. What is a reasonable compensation for a mortgage broker? Should yield spread premiums be banned? Answer: This topic certainly needs to be discussed because there is a lot of misunderstanding. Let’s start from the beginning. A Yield Spread Premium, or YSP, is indeed a fee paid by a lender to a mortgage broker. The higher the interest rate, the higher the YSP. YSP’s are nothing but discount points in reverse. The lower the interest rate, the more discount points charged by the lender. On any given day I receive close to 60 wholesale rate sheets through the fax. All of them offer a variety of 30 year fixed rates with different “prices”. The price i
