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I recently got a GFE from my mortgage broker. Its a 91K loan, he is charging 1 point origination fee, 545.00 processing fee...and then there's a line for yield spread premium..it says 1.76%, $1607.00. When I asked him about it, he told me that is the amount he may or may not earn from the bank. Am I being ripped off? Help please!

gmakerley · Posted: Sun Oct 25, 2009 8:18 pm Post subject:

no you are not getting ripped off. ysp is where your loan officer makes his money. all that hard work he did? that's his reward. take it away, and his earnings on your loan amount to $ZERO per hour.

doesn't he deserve to get paid? could you have done better? maybe...we don't know the circumstances under which you got your loan - the rates that day, etc.

pay the poor guy - who knows, this could be his only loan of the month, and that amount of money won't even pay the rent.

adonis · Posted: Sun Oct 25, 2009 8:20 pm Post subject:

Hi vngckl,

Yield spread premium is a fee paid by the lender to the broker in exchange for a higher interest rate. As a borrower, you may qualify for a certain rate but the broker can charge this fee and give the borrower a higher rate to make more commission. May be your lender wants to increase his commission and as a result he is charging the extra fee.

raymond · Posted: Sun Nov 01, 2009 2:43 pm Post subject:

That sounds reasonable for a $91,000.00 mortgage. He only makes $910.00 with the Origination Fee, and it probably cost him that much to do the loan (I have to pay $945.00 for each loan I do). However, if the mortgage was for $500,000.00 I may feel different. He'd be making $5,000.00 with the Origination Fee, and a 1.76% rebate would be inappropriate (in my opinion).

But I'm also assuming it's an easy loan, for somebody with an 720 FICO and no bumps in the road during the loan process - so it also depends on how much work your Loan Officer did to put your loan together and take it through the system. Did he spend half a year helping you prepare? Or do you have an 800 FICO and everything else about you is perfect?

But this was wrong of him to say, because it's not the truth ... he structured the loan to ensure he'd earn it from the bank:

>>he told me that is the amount he may or may not earn from the bank

gmakerley · Posted: Mon Nov 02, 2009 7:46 pm Post subject:

raymond, that's a great explanation, and you fit in a commentary about the hard work that a loan officer does with no remuneration whatsoever.

let's face it - sometimes looking out for the customer's best interests puts our own interests in jeopardy. yet we still have food to put on our table, mortgages to pay, etc. i think most lay people think that loan officers are too highly compensated, yet the exact opposite is a far more likely situation.

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