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A yield spread premium (YSP) is the money or rebate paid to a mortgage broker for giving a borrower a higher interest rate on a loan in exchange for lower up front costs, generally paid in origination fees, broker fees or discount points.
In finance, the yield spread or credit spread is the difference between the quoted rates of return on two different investments, usually of different credit qualities but similar maturities. It is often an indication of the risk premium for one investment product over another.
The Federal Reserve has banned mortgage fees you probably weren't even aware of, but that were inflating your home-loan interest rate. On Monday, the Fed announced it was banning yield spread ...
The spread between the LIBOR (or swap) rate and the government bond yield of similar maturity is usually positive, meaning that private borrowing is at a premium above government borrowing. This spread is a measure of the difference in the risk tolerances of the lenders to the two types of borrowing.
The Fed spelled out its goals yesterday: "Prohibit lenders from paying mortgage brokers "yield spread premiums" that exceed the amount the consumer Abuses the Fed hopes to correct with the new ...
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Mortgage brokers, on the other hand, earning the same yield spread premium, disclose the additional fee to the consumer because the yield spread premium becomes an additional fee earned and therefore disclosable under federal and state law. [1]
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