To Do Libre Blog
Heavenly Blog
Refinance Mortgage Rates Increase with Yield Spread Premium
March 24th, 2009 by admin
There is a constant battle among mortgage brokers to show potential new refinancing customers the lowest rates and fees, while maximizing their own profits. One method for producing a “smoke and mirror” good faith estimate aimed at pleasing a refinance customer is the use of Yield Spread Premium or YSP. In a nutshell, YSP gives the mortgage broker a lender rebate, if they lock a customer into an interest rate that is higher than a par or even rate.
YSP will not be shown on the good faith estimate, which allows the broker to show reduced amounts for origination fees. The shopper sees low lender fees and may think that the broker is giving them a break, but in fact, they are locking into a higher interest rate than they are truly eligible for. If this is disclosed upfront, there is really no issue, but most will not disclose YSP until the final HUD comes in at closing. If you want the lowest refinance mortgage rates available to you, make sure to ask whether YSP is included in your rate quote.
