And I quote, "A yield spread premium is the fee paid by a lender to a broker for higher-rate loans." This is a full fledged lie. That is not what YSP is at all. Let's review this one more time because it is very obvious there are many people who do not get it. Let's use FACTS instead of just lies, okay?

FACT: Brokers offer retail rates just like lenders and banks.

Call any bank or lender and apply for a loan and get your rate. Now call a broker and do the same thing. The rate will be within .25% up or down so long as you are comparing the same loans. If you compare a stated income interest only second home purchase with 10% down at a broker to a primary residence full doc with 20% down at a bank, no duh, their will be a difference. If you compare a fixed 30 full doc primary at 80% at all three institutions the costs should be within just a few dollars. If not are you too stupid to ask WHY?

FACT: Lenders make more profit from loans that mortgage brokers.

Lenders do not receive YSP, lenders PAY YSP to brokers for bringing the loan. Lenders make their money from (a) servicing the loan. This is a gamble because they don't know when the borrower may either pay the loan off or stop paying. Interest is front loaded on mortgages so almost every penny paid in for the first three years is interest--the principal is paid down very little. If the lender keeps the loan "on the books" for three years they've done well.

They may also (b) sell the loan to another investor. When this happens the lender makes their profit at the time of the sale and transfers the risk to the purchasing investor. At the time of the sale the lender earns what is called Service Release Premium or SRP. While brokers are generally earning 1% to 2% of the total loan amount at the very maximum in YSP the lender will earn as much as 5% to 8% in SRP.

YSP is required to be shown on the HUD-1 (Settlement Statement). It is also required to be shown on the Good Faith Estimate (GFE) and in some states it can be shown as 1% to 3% of the loan amount while other states require a "to the penny" disclosure.

LENDERS AND BANKS ARE NOT REQUIRED TO DISCLOSE THEIR PROFITS -- MORTGAGE BROKERS, BY FEDERAL LAW, ARE REQUIRED IN EVERY STATE TO SHOW ALL OF THEIR PROFIT. 

FACT: Lenders like working with brokers.

Recent reports from the National Association of Mortgage Brokers (NAMB) put the cost of loan origination in the neighborhood of $2500. This is for advertising, office costs, employee costs, material costs, service fees, etc. If the loan is originated by a mortgage broker the majority of this cost falls to the broker--not the bank or the lender. Lenders and banks still get their SRP and still don't have to disclose.

FACT: Only scumball brokers take advantage of borrowers by "jacking the rate". (But lenders and banks are just as bad or are WORSE than brokers--I know, I have employees who worked for some "big names" and they tell horror stories.)

Mortgage brokers get what is called a wholesale pricing discount. It is generally about 1/2% less than the rates you see advertised. When you call a broker they will charge you the SAME FEES THE LENDER OR BANK CHARGES and you should be getting the SAME RATE for the SAME LOAN or even a little less than you would by going directly to the bank or lender. Yes, the broker COULD charge you 1/2% less but remember the cost of origination? Yes, just like any other retail purchase, you're going to have to cover those costs.

FACT: Especially on non-conforming (you call them subprime) loans brokers are less expensive than lenders or banks. BROKERS ARE CHEAPER

In 2005 a report of over one million sub-prime loans (we're not talking a little study group here) were examined for fees and it was determined by this report by Georgetown University economist Gregory Elliehausen that "mortgage Broker-originated loans were 1.13 percentage points less costly than mortgage lender originated first mortgages, according to the statistical analysis. On second mortgages, the gap was even larger -- broker loans were 1.97 percentage points cheaper."

FACT: If you apply at a lender or bank and are denied you must completely reapply elsewhere and likely have to pay for a new appraisal as well. With a mortgage broker there is no additional application. Many banks and lenders also charge an application fee--most brokers do not.

Lenders and banks are (generally) limited to only their pool of loan products. If you apply with a mortgage broker they have many banks and lenders who they work with and each of them have differing guidelines. While one lender or bank may decline your application another lender or bank may make exceptions to their guidelines based on your good payment history or newly increased income for example. The broker will simply submit the package to a different lender.

FACT: Big bank and lender ads showing interest rates likely do not apply to you. If anyone quotes you a rate over the phone without knowing your details such as credit history, income, assets, employment, or about the property it is probably wrong.

Call around and ask, "Can I get a rate quote?" The correct answer should be "absolutely, let me start a loan application on you and I will get you an accurate quote very quickly". There are people who call themselves "upfront mortgage brokers". Okay, well I call them "upfront bull crappers". Yes, I can quote you a rate, how about 5.75%? That's a pretty good rate. Do you and your property qualify for it? I have NO idea. What I said is TRUE. 100% true--if that's not upfront then nothing is. Some upfront fees can be fixed, others--such as pre-paid interest days, PMI, etcetera, are based on floating factors.

FACT: The FED controls the economy and has the power to destroy it or make it on their own.

The Federal Reserve Board was formed in 1913 to standardize money. (Re-read that and instead of standardize say "control".) Control is exactly what they have done. They have the power to change the value of money overnight. Since money is no longer tied to anything other than debt and commitment of funds (your tax dollars by the way) the Fed is now the god of money.

QUESTION: Do you think anybody is on the tail of all these credit card banks , furniture companies and auto manufactures for their NO PAYMENTS UNTIL WHAT YOU BOUGHT FELL APART IN 3 YEARS? How about "sign and drive"??? Cars depreciate RAPIDLY. Furniture, unless it is fine heirloom furniture, falls apart in months in the hands of the right children.

I know because I see people's applications to refinance: It ain't the mortgage they can't pay--it's the $6500 worth of furniture they bought 2 years ago when they got their 2 year ARM. It's the BMW or Lexus they drive which they purchased 2 months after getting that 2 year ARM. It's the dining out and vacations and $500 dresses and $1000 suits! People who are not frugal needed ARMS to get a home. Had they done as most loan officers instructed and said, "BABY YOUR CREDIT" and refinanced this thing when your scores improve. Do NOT go out and get a bunch of credit debt. Be conservative until you can get out of this loan." 

Be careful what you wish for--you just may get it.

http://www.homesalesri.com/resources_lenders.php
http://en.wikipedia.org/wiki/Federal_Reserve