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Yield Spread Premium

A percentage of the loan amount, the Yield Spread Premium is what a lender pays a broker for a loan with a higher interest rate, and lower fees.  It can be defined as "negative points" because the lender pays the mortgage broker for the higher rate.  It is an effective way to reduce your closing costs if you are holding the property for a short time period.

 

YSP or "Yield Spread" is usually built into the rate by the broker charging a higher rate at different levels to be paid more by the bank doing the loan and is disclosed at closing on the HUD statement.  You may find yourself paying more for the loan with YSP versus paying a lower rate not including YSP.

 

Direct Lenders earn a "Servicing Release Premium" as they lend their own money and may or may not sell the closed loan paper on Wall Street for servicing after the loan has been closed.  This is a very common practice. Essentially, servicing release premium is to correspondent lenders what yield spread premium is to mortgage brokers.

 

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