Yield Spread Premium

If you are getting your mortgage deals via mortgage brokers, be prepared to deal with the Yield Spread Premium. Yield Spread Premium or YSP is a form of bonus or commission given to your mortgage broker for their services; the bonus is given to them by lenders providing you with the actual mortgage loan. The problem is, it is regulated by law to disclose the amount of YSP given to mortgage brokers at the closing through your statement of settlements.

YSP has been quite a problem in the mortgage loan industry — and possibly several other kind of loans — because of several reasons. Brokers are claiming that the customers are happy with the deal they get, so the YSP is no longer relevant by the time it is disclosed to the customers. Customers, on the other hand, are complaining about YSP because they can in fact get better deals on their mortgage loan without the presence of YSP. Customers are paying the YSP after all, and they do have the rights to choose better amount and get better deals on their mortgage loan.

The best way to deal with this issue is to negotiate early and simply ignore YSP at all once you are happy with the mortgage loan scheme you get. Negotiating after the YSP is disclosed will be of no use since you have already sign aggrements.