Yield Spread Premium is known as many things from broker payment to vig.I prefer to feel it is my compensation, but apparently the government thinks it is the latter.A mortgage broker gets paid by the lender a fee for work done and only when the loan closes.This fee is earned for services rendered such as networking, having a client referred to them, calling the potential client, learning about their situation and needs, choosing a fitting loan product that is best suited for the client, completing long, long application form, obtain credit reports and reams of paper from the client and vendors, putting the entire package together hard copy as well as digital, processing the application, sending it to more than one lender, underwriting the file, clearing many conditions required to obtain final approval, obtain more items, speak to more people, watch the interest rates, lock in the rate, coordinate a closing date, obtain loan documents from the bank, take care of last minute fires, answer questions at the closing and call the client to make sure that all went well because they never call to thank you.For this easy task the bank pays the broker a yield spread premium as a fee for the broker doing all this work independently and without cost to the lender.Banks discount the interest rate for the brokers and the broker can increase the rate to make a higher fee from the bank.The client, in turn, gets service and choice from the broker and an interest rate that should be the same or lower than if they went directly to the bank.If the yield spread premium is done away with, most brokers will close their doors.Without the service of the mortgage broker, the consumer will have to do all of the [above] work themselves.Of course, the government is still finger pointing as to blame and this week it is the mortgage broker – again.I agree there are many sharks and shady characters in this industry. This is why my Mother always refers to me as “my daughter, the lawyer”.However, this is a legitimate fee paid for a fair service.If the service is provided, than the fee is fairly paid.If the broker provides the service and offers a competitive rate, then the fee is fair.

     This is why they decided not to take away the yield spread premium. I believe that the fee earned by the broker should be capped at a much lower amount than they can make now. Again, as I always scream, make sure you know who you are dealing with and the reputation of the company and person.Next week……let’s blame the realtors!!I am still waiting for the media to be sanctioned for this mess.Isn’t that the First Amendment?Let’s not go there.Wow…. I am exhausted after this crazy week in the market.OUCH!Have a great weekend

– Dale Siegel