How To Read Mortgage Rate Sheets

Mortgage rate sheets are a godsend when it comes to keeping loan officers honest. The mortgage rate sheets tell the tale when you are quoted an inflated rate.

You can catch this artificial upping of the rate (Yield Spread Premium or Service Release Premium) and eliminate it by knowing how to read the mortgage rate sheets. You’ll need to ask to see the mortgage rate sheets on the day of lock. Ethical brokers will always share the rate sheets with clients. Unethical banks and brokers will find some excuse not to.

To beat these guys at their own game, you simply must learn how they price a loan using mortgage rate sheets. Reading this article is a good start, however, the complete guide to eliminate Yield Spread and Service Release Premium overcharging is outlined in our shopping system, The Mortgage Advantage.

Understanding how to price a loan by reading mortgage rate sheets is really quite easy though it may seem intimidating at first. It will all become clear as you read this so take the 10 minutes and understand this practice. Doing so will save you $1,000’s over your lifetime owning and financing houses!

Here we go!

All lenders furnish rate sheets on a daily basis. When reviewing the mortgage rate sheets, we also determine which rate will NOT create a rebate from the lender known as a Yield Spread Premium. We believe upping your rate to make additional revenue over the 1% origination fee is deceptive, dishonest, and a bad business practice…believe me, other companies DO NOT hold that opinion.

Let’s use the rate sheet data below to demonstrate how we determine the rate that we quote ethically to our borrowers. We will also show you using the corresponding HSH Survey data how other Brokers and Banks are making enormous undisclosed profits in the form of Yield Spread Premium.

Mortgage Rate Sheets data was collected from a real Wholesale Lender on 03/10/2006.

30 Year Fixed Rate

15 Day 30 Day 45 Day

5.750% 1.350 1.475 1.600
5.875% 0.611 0.736 0.861
6.000% 0.039 0.164 1.826
6.125% (0.392) (0.267) (0.142)
6.250% (0.773) (0.648) (0.523)
6.375% (1.180) (1.055) (0.930)
6.500% (1.623) (1.498) (1.373)
6.625% (2.029) (1.904) (1.773)
6.750% (2.280) (2.155) (2.030)

HSH ASSOCIATES National Ave. SURVEY CONVENTIONAL
30 Yr
6.51%

In our example, we will quote our borrower a 30 year rate that carries a lock period of 30 days. If we are seeking to earn only a 1.0% origination fee and NO yield spread premium (back end fee), we will quote the rate of 6.000%. According to the mortgage rate sheets, 6.000% actually costs .164% Discount payable to the Lender not us at Integrity First. On this mortgage rate sheet, 6.000% is as close to par pricing as we can get. As you can see the next higher rate, 6.125% creates .267% of Yield Spread Premium and that’s not good.

So with this example, look at the costs for a loan at 6.00% with us.

Rate: 6.000%, $200,000 Loan x 1.0% Broker Origination Fee + 0.164 Discount = $200,000 x 1.164% = $2,328.00

Now we will show how everyone else does it!

First realize that banks and brokers don’t usually quote you the rate you’ll close with. They “bait” with low-ball rates and artificially lowered closing costs to get you to apply with them. Then on closing day, the rates and costs “switch” to those higher than expected. You’ve got the moving van idling in parking lot, so you sign.

The old bait-n-switch on the rate is a common practice. The loan officer will get very creative on explaining all the reasons why this had to happen, but suffice it to say, this was the plan from the beginning.

So with this mortgage rate sheet data, let’s look at what they made.

Rate: 6.500%, $200,000 Loan x 1.0% Broker Origination Fee +1.498 YSP = $200,000 x 2.498% = $4,996.00

The banks and brokers simply cannot forgo the Yield Spread Premium overcharging because at the very least it DOUBLES their income!

Now with this tutorial and our daily rate updates you can protect yourself from the most egregious consumer rip-off in history.

Of course, locating a local, ethical broker who will share his mortgage rate sheets with you is your best protection…check out The Mortgage Advantage to learn step-by-step how to interview and hire the right provider.

Good Luck!

Author: Rob K. Blake
Published December 1, 2007

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