Finance
An Arizona lender's 'yield spread premium' (YSP) historically referred to:
AThe lender's profit on selling the loan in the secondary market
BCompensation paid to a mortgage broker for delivering a loan at a rate above the lender's par rate (above market rate loans)✓ Correct
CThe spread between the ARM index and margin
DThe difference between the note rate and APR
Explanation
YSP was compensation a mortgage broker received from the lender for originating a loan at an above-par (above market) rate. TRID reform has changed how broker compensation is disclosed and limited certain practices.
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Key Terms to Know
Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Math Concepts
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