What Is the YSP in a Loan?
The YSP is often the only money a mortgage broker makes. The mortgage industry is not unlike any other business. Working on margins, there are times a mortgage broker will offer you a mortgage with no margin at all. This provides a lower interest rate. The broker will then charge origination points in order to earn some profit on the sale.
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Definition
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YSP is short for yield spread premium. It is used by a broker to make a profit. It can also be used to limit the borrower's closing costs on a loan.
Closing
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If the borrower does not have enough money at closing, the broker sometimes can credit the money using the YSP.
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Calculation
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The YSP is figured as a certain percentage of the loan.
Broker's Compensation
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In return for compensation from the lender, sometimes brokers will make a YSP on a loan. This normally means the broker is changing the loan to a higher interest rate. It also means that more than likely the broker is making outside compensation from beyond the borrower.
Suggestion
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YSP can also increase if there is a prepayment penalty added to the loan. If this is the case, get the broker to add a prepayment penalty to the loan and ask that the upfront fees be lowered.
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