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Yield spread premium and lender credit
Is yield spread premium and lender credit the same?

Yield spread premium is the commission a broker makes. A mortgage broker makes a commission agreement with a lender on what comp plan they want to be on. Once they choose a comp plan, they need to stick to it otherwise they violate the anti-steering laws. The maximum comp plan a mortgage broker can make is 3.0% yield spread premium. Anything over 3.0% can go towards lender credit towards a buyers closing costs. The higher the mortgage rates, the higher the yield spread premium. The maximum by law a mortgage broker can charge is 3.0% yield spread premium. If a mortgage broker is on a 2% yield spread premium with a mortgage lender, the mortgage rates will be less to the borrower. However, if the mortgage broker chooses a 2% yield spread comp plan, it applies to all of the employees of the broker. You cannot lower or raise yield spread premiums. Mortgage bankers, bankers, and credit unions do not have to disclose yield spread premiums.

Here is an article on yield spread premiums a mortgage broker charges. This is an excellent question by the way.



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