Yield-Spread Premium
Definition of "Yield-Spread Premium"
A payment made by a lender to a mortgage broker for delivering an above-par loan. A par loan is one on which the lender charges zero points. Lenders charge points on loans carrying interest rates below that on the par loan and pay points or rebates on loans carrying rates above that on the par loan. On loans involving mortgage brokers, the rebate on above-par loans is credited to the broker, and is referred to euphemistically as the 'yield-spread premium'' (YSP). YSPs are a major part of broker income. Because borrowers pay YSPs indirectly in the interest rate, they resist them less than they would broker fees paid directly out of their pockets. But a comparable form of 'rebate abuse' also occurs with lenders.
Popular Mortgage Terms
Refinancing for an amount in excess of the balance on the old loan plus settlement costs. When the main objective of a refinancing is to raise cash, the relevant question is whether the ...
A borrower who doesn't pay. ...
A comprehensive and time-adjusted measure of loan cost to the borrower. IC on a Mortgage: IC is what economists call an 'internal rate or return.' It takes account of all payments made by ...
The period you must retain a mortgage in order for it to be profitable to pay points to reduce the rate. ...
Trying to find the best deal on a mortgage. It isn't easy to do right, as a summary of the major steps involved will demonstrate. Step 1: Decide if you are a potential shopper. Step 2: ...
The policy of a second mortgage lender toward allowing a borrower to refinance the first mortgage while leaving the second in place. ...
A measure of interest cost on a reverse mortgage. ...
Administering loans between the time of disbursement and the time the loan is fully paid off. Servicing includes collecting payments from the borrower, maintaining payment records, ...
The period over which the interest due the lender is calculated. The interest accrual period may or may not correspond to the payment period. On the annual accrual mortgages in the UK, ...
Have a question or comment?
We're here to help.