Finance
In Missouri, a 'yield spread premium' (YSP) historically referred to:
AThe appraiser's fee
BCompensation paid by a lender to a mortgage broker for placing borrowers in higher-rate loans✓ Correct
CThe difference between market and assessed value
DA commission bonus for selling multiple properties
Explanation
YSPs were payments from lenders to mortgage brokers for originating loans at above-par interest rates. New CFPB rules largely eliminated traditional YSPs and require loan originator compensation to be disclosed.
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Key Terms to Know
Discount Points
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
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