Brokers' Hidden Fees Led Home Buyers Astray

yield spread premium; agent fees; YSPs
yield spread premium; agent fees; YSPs

In my last post, I began to lay the groundwork for the argument as to why the mortgage (and real estate) markets need radical transparency to restore consumer and investor confidence. I described my experiences working in the industries and my resulting opinions -- most specifically about a little-known fee called the yield spread premium (YSP).

YSP was often used as an under-the-table rebate given to a mortgage broker and in exchange the borrower received a higher interest rate.

A few commenters challenged the idea that YSPs had much of anything to do with the housing demise (along with my relative acumen ... but I digress). My contention is that YSPs were an enabling factor, a root cause if you will.

YSPs provide an incentive for brokers (and bankers) to steer consumers into more expensive loans, IF NOT PROPERLY DISCLOSED.