Yield spread premium is easy to understand if you think of it as “the income made by unnecessarily raising your interest rate”.
A loan officer earns is income by arbitrarily raise the rate of your loan over the “par rate” and the income derived is called the yield spread premium. The larger the rate bump the greater the profit.
Bernanke’s new mortgage rules are devoid of any real protection from bad mortgage originators since they conveniently skipped regulating yield spread premiums. The new rules apply to all mortgage lenders and therein lies the rub. If the Fed wanted to reign in mortgage broker yield spread premiums they’d also have to address bank service release premiums.
Mortgage originators tell you your mortgage lock is in force when it is NOT. Lying about your mortgage lock status is a common practice to increase loan revenue or cover loan officer mistakes.
Loan officers are always trying to make the most yield spread revenue on every mortgage. Telling you the mortgage lock is placed but then not actually locking the rate with the wholesale mortgage company allows them to “play the market” with your money.
A Florida mortgage broker found a way to rip-off people he never even met: the home seller! Mortgage broker greed reaches an all time high with this unconscionable scam.
So I was over checking my blog on ActiveRain and ran upon a Florida real 
estate agent who sparked this post. His comment said a buyer client was told to ask the seller for 6% in closing costs!
I’ve compiled a few resources on average mortgage rate data and yield spread premium starting with Congressional testimony from experts and ending with average mortgage rate resources online.
Be sure to read the Harvard Professor Jackson’s testimony if nothing else….
Eliminating yield spread premium starts by avoiding banks like the plague. Bank mortgage rates will always include their version of YPS since they have no legal duty to disclose it.
(In the banking world YSP is call service release premium. This “different” classification was the legal technicality or loophole the industry used to legally avoid consumer disclosure altogether.)
Mortgage yield spread premium is responsible for up to two thirds of the revenue earned on every mortgage. Yet most Americans have no knowledge of mortgage yield spread premium or how to avoid it.
Locating the yield spread premium rip-off is virtually impossible except at closing on the settlement statement known as the HUD1 Settlement Statement. Of course, by then it’s too late!
Other non settlement statement mortgage disclosures specifically the Good Faith Estimate (the mortgage application disclosure) are useless for discovering yield spread premium overcharging since most brokers either never disclose or obfuscate the disclosure as you’ll see below.
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.
Yield Spread Premium (YSP) is without a doubt the most misunderstood and highly profitable secret the mortgage industry has kept from the American mortgage consumer.
The government’s own number pegs the consumer cost of the yield spread premium deception at $16,000,000,000 a year
…yes that’s billion, with a “b”! My own figures put it into the hundreds of billions of dollars since the government’s numbers were woefully short-sighted.
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