Service Release Premium (SRP)/ Overage is profit that banks make when they sell a Borrower's loan to a servicing company post closing. Amazingly, banks are legally allowed to hide this profit, never having to disclose it to consumers.
Banks make money on the interest rate they sell to borrowers, but because they close the loan in their own name on the closing documents, the government does not require them to disclose their SRP/ Overage profit to the borrower. This hidden profit is often much more than a broker would receive if they sold the same higher rate loan.
Mortgage brokers have been disclosing their compensation from lenders called Yield Spread Premium" (YSP) for years on the Good Faith Estimate. But, because loans do not actually close in the broker's name on the closing statement, unlike Banks, the government now requires brokers to show this amount added to the total origination charge section on the new Good Faith Estimate. However, this amount is then shown as “Credit to the Borrower,” thus simultaneously reducing the amount back down in the “Adjusted Origination Charge” making it a wash. Confusing? Yes, but this is exactly the way the Banks want it to be!
The reason for this you ask? Banks are counting on the confusion of consumers and their initial faulty perception to paint a rosier picture of banks over the mortgage broker, when in reality; it's the broker who usually offers the consumer the better deal. For years banks have relentlessly worked through their Washington influence and lobbyists to create this 'tilted playing field' allowing their SRP/ Overage profit to be hidden from the consumers. Unfortunately, after all the housing mess they helped to create through their unlicensed loan representatives, banks have once again been allowed to slip through the loop hole and have succeeded with the confusing New Good Faith Estimate.
But unlike banks, who rely on confusion and government assistance to help them monopolize lending by eliminating their competition, Brokers originate millions of mortgage loans in America by offering consumers better service, lower rates and/or costs, better terms, more options through multiple wholesale lending sources and the ability to close much faster.
Brokers are the #1 one obstacle standing in the way of banks reaching their goal of complete control of the mortgage market allowing them to dictate who can, and who can’t get a loan and what rate and terms consumers will be forced to pay.
Steve McRory
Pro Option Mortgage
REVIEWS > www.pro-option.com/ProOptionReviews
Ph: 888-662-4404
nmls#204296
Comments(12)