Finance
What is 'yield spread premium' (YSP) and what regulations address it in Illinois mortgage lending?
AA lender's profit from securitizing Illinois mortgages on the secondary market
BCompensation paid to mortgage brokers by lenders for delivering loans at above-market rates; now subject to restrictions under Dodd-Frank's compensation rules✓ Correct
CA premium paid to borrowers in Illinois for selecting a lender's preferred rate
DA state-regulated fee for originating mortgages over $500,000 in Illinois
Explanation
A yield spread premium (YSP) was compensation paid by lenders to mortgage brokers when borrowers accepted higher-than-market interest rates. Critics argued YSPs incentivized brokers to put borrowers in unnecessarily expensive loans. Dodd-Frank (2010) restricted loan originator compensation, prohibiting payment of YSPs based on loan terms and capping total compensation. Illinois borrowers benefit from these federal reforms in how mortgage brokers and loan officers are compensated.
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