Definition: Extra money paid by a mortgage lender to a mortgage broker as a bonus often represented as a percentage of the original loan balance. Typically, if a lender is paying the broker a premium bonus, it's because the broker left "money on the table" either through points or rate. This money the lender is paying the broker, well, it is sometimes argued that it could have gone to the borrower in the form of an interest rate reduction or fee reduction or both. Instead, it goes into the mortgage broker's pocket.
If the borrower does not pay the mortgage broker, the mortgage broker is then paid by the lender. Mortgage brokers provide a valuable service for which they earn a fee. Borrowers generally can pay the mortgage broker upfront and receive a lower interest rate. Not all YSP is bad.
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.
Examples:
Mortgage lenders often pay up to 2% as a yield spread premium to mortgage brokers, so borrowers should ask about the YSP way before closing.
