Yield Spread Premium (YSP) is the most common reason to lose a mortgage rate lock. Yes, I have lost my patience! Homeowners are still having problems with locking! And much of this loss is due to closing costs and YSP. Keep reading to learn how to protect the mortgage rate you think you locked.
Don't get me wrong. Yield spread premium rebates used responsibly by mortgage brokers can be beneficial to you.
It works like this. A mortgage broker is offered wholesale money from lenders.
The higher the locked-in interest rate, the greater the profit.
Originally yield spread premiums were intended to be applied to mortgage closing costs or mortgage broker fees.
This helped home buyers use their cash efficiently to make larger down payments.
In the event of a refinance, these rebated premiums helped a homeowner finance less and retain more equity.
Although disclosure of yield spread premiums (credits) by mortgage brokers has improved, banks are not regulated in the same manner. Protect yourself by going to the new and updated information at Understanding Mortgage Closing Costs and the New Good Faith Estimate Form.
The Good Faith Estimate form is replaced by the Loan Estimate form under the TILA-RESPA Integrated Disclosure rule (TRID).
But what happens when significant fees AND a YSP are charged? Can we all say double dipping? Now I can't tell you what constitutes fair closing costs or how big a YSP rebate should be but I will say this.
Had a homeowner insisted on receiving a written mortgage rate lock agreement and loan estimate, proof of the promised rate and fees would exist.
Are you wondering why I said yield spread premium is the greatest cause of losing a rate lock? There's an easy answer.
If the mortgage broker never followed through with a lock-in before interest rates rose, increased rates lowered your YSP rebate. In addition to losing any profit, if rates rose high enough, he would have to use his own money to close the transaction.
Where is the incentive for a broker to close? Your mortgage loan just became a hot potato. The broker cannot drop it fast enough. There is no profit left for him.
Sadly, without a written rate lock agreement, a borrower cannot prove the low rate of a lifetime that was supposed to have been locked.
It's time for this practice to end! Get your mortgage rate lock agreement along with mortgage closing costs in writing. You owe it to yourself.
Not that I want to dwell on the negative. But I do want to impress upon you why getting your rate lock agreement IN WRITING is a must!
Mind you, not all brokers have unethical practices. But if the number of stories on the internet about losing rate locks is any indication, I don't recommend taking chances.
Asking for a written rate lock can help prevent getting...
Do you know the one question to ask to save huge amounts of money over the life of a mortgage? Where is my written rate lock agreement?
After all, if you have been browsing my website, you know what I am going to say. It is your mortgage. No one cares more about it than you. I know you deserve the best!
Tip: Check here for current mortgage rates and trends because there is no need to scour the internet when up-to-date information is easily found here.
What if you could ask a mortgage insider anything you wanted regarding your home mortgage?
Now you can!
Ask Kate is specifically designed to answer your questions and create dialog regarding mortgage financing.
January 2016: The Mortgage Forgiveness Debt Relief Act Update.
September 2015: Fannie Mae and Freddie Mac Improve Loan Modifications.
Keep on the right path at A Homeowner's Survival Guide to the Intimidating Mortgage Process.
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