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
A payment made after the grace period stipulated in the note, usually 10-15 days. ...
A term that small lenders sometimes use to distinguish themselves from mortgage brokers. ...
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A rate lock, plus an option to reduce the rate if market interest rates decline during the lock period. ...
Charging unwary borrowers interest rates and/or fees that are excessive relative to what the same borrowers could have found had they shopped the market. ...
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An option exercised by the borrower, at the time of the loan application or later, to 'lock in' the rates and points prevailing in the market at that time. When lenders 'lock/' they ...
The date on which the closing occurs. On a purchase transaction, there is no financial advantage to the buyer/borrower in closing on any day of the month, as compared to any other day. ...
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