What is a yield spread premium?
Yield Spread Premium or YSP are fees paid by the mortgage lender to a mortgage broker in return for the delivery of a loan that carries a higher interest rate. The higher interest rate is the interest rate above the par rate. A par rate is a rate at zero points. Points are expressed as a percent of the loan. Each point is typically one percent of the loan amount. One point for a $300,000 loan is $3,000. Fannie Mae & Jumbo Mortgage Rates Just One Click! = Current Rate Chart In other words, YSP is the money paid to the mortgage broker. This is one way mortgage brokers receive more money for each loan. The mortgage broker will quote a higher (than par) rate and in return receive money back from the mortgage lender. In this case, the lender will pay the broker points for booking the borrower into a higher interest rate. Conversely, lenders charge the points to the borrower for rates below the par rate. For example, borrowers will pay points when they buy down the rate. The excess points ch
• Simply put, Yield Spread Premium, or YSP is a rebate paid by a lender to a mortgage broker for brokering a loan to that lender. Mortgages are securities. Mortgage-backed-securities are traded on Wall Street just like other bonds. They have a standard price (to buy) and a standard yield (to sell). The higher the yield, the more money the seller will make when they sell. So if a mortgage broker originates a loan at 6.5% and 6.5% is the going rate for the mortgage-backed-security of which the loan will become a part, then there is no spread beyond the standard yield. If however, the broker originates the loan at 7.0%, now there is a SPREAD beyond the normal YIELD, for which the lender will pay a PREMIUM. Hence YIELD SPREAD PREMIUM. This can be kind of confusing stuff. So just remember, YSP is basically a rebate that someone gets for brokering a loan to a lender. It is not paid by the borrower (except that the homeowner’s interest rate could be higher which will have them paying more ove
The yield spread premium is the cash rebate paid to a mortgage broker based on selling an interest rate above the wholesale par rate that the borrower qualifies for. According to a HUD rule (RESPA 197), lenders that fund loans and then sell it after closing do not need to disclose the amount of the yield spread premium they make. However, brokers are forced to disclose the amount of yield spread they get from the bank. The advantage to this is that payment to brokers is not paid out of loan proceeds.
