The commission earned through yield spreads is one of the sickest most diabolic schemes the mortgage industry pulls on borrowers. A Yield Spread is the extra commission the loan officer snags from the lender when they convince you to take a loan at a higher rate or with worse terms than for which you qualified. In the words of Neil Garfeild, “This means the salesmen who sold you the loan product convinced you through misrepresentation of the loan that you will be better off with the worse loan. He knows it is worse but he gets paid for putting you in a worse loan.”
Want to see this in action? Pull out your HUD from your closing. The paper that shows all the money flowing. Look on page 2 for items such as Origination Points, Discount Points, etc., and add up those fees you paid. Now sniff around some more and look for items that say P.O.C. (paid outside of closing) and or YSP (yield spread premium). If you find them they will typically have the amount in brackets OR off the main part of the calculation. This amount is the “kicker” in commission for pointing you in the wrong direction.
So he skews the facts and misdirects your attention until you come to “agree” that the worse the loan is the “better.”
The Bank Slayer
So true!! I didn’t realize this though until it was too late.
Thank you,
very interesting article
Nice article