How Brokers Get Paid

Video Transcript

"Okay so for things most mortgage brokers, bankers and things like that don’t want you to know or don’t care to educate you on we’ve talked about how your interest rate works. The other thing we’re going to talk about they get paid. They myself included because I am a mortgage broker okay, here are two ways we primarily get paid, there are actually three but two main ways. The first way we get paid is called a origination fee and that is what is charged directly to you on your good faith estimate and then on your HUD and everything you will see origination fees and those are the points that we as brokers or the banks charge the consumers to do their loan, okay. That’s something upfront that should be disclosed and shown to you, if it’s not you should ask it, what is the origination fee on this? The other thing is what we touched on before, it’s called YSP, yield spread premium. Here is where the banks pay us or pay their employees for selling different programs and different rates. This is important to know, a lot of times, by the way by law it’s supposed to be disclosed by brokers, but a lot of times it's not or they vary it. They say broker could be compensated up to three percent by the bank and they leave it open to cover themselves. These are the things that you should ask because it has a great impact on you. Okay, YSP again, is what the banks pay the broker so for a broker to get YSP he can put you in a different loan program where they offer more credits. Okay, he can put you in a pre-payment penalty, where he gets rewarded by the bank for making sure that you stay in the loan for a certain term, okay, or he puts you in a higher interest rate where he gets paid back, okay or with the adjustable rate mortgages he can put you in higher margins. Okay, up your margins so that when it adjusts, the bank is going to make more money, right and then he gets paid more for that on the back end. A very important question to ask brokers, what is your YSP or yield spread premium? No mortgage broker, banker, anybody should be ashamed of what they are making and you shouldn’t shame them into trying to make less, it is their livelihood and it is their business as long as they disclose it and they are upfront and it’s something that everyone is comfortable with then you should move forward as long as you are comfortable also with the person that you are dealing with. Don’t try to haggle a person out of their livelihood because I know that you wouldn’t appreciate it, if it’s done to you. At the same time ask them the proper questions to make sure that they are disclosing things up front and everybody is aware of the situation, okay. So that is the way that they get paid. "