I am putting together a post re: the intended and stated purpose of YSP (case law, statutes, etc).

It will be an interesting dialogue…

Also, where did you come up with the idea that YSP is only for closing costs? That’s not the reason it exists. The reason is capitalism. One lender tries to lure business from another lender by paying their clients (brokers) better. That’s it, plain and simple.

As I stated before, the company I work for does better business than most brokers. We deliver more volume, and better processed loans, with less fallout than our competition. Because of this, wholesale lenders will pay us better than they will a mediocre broker. We can earn more, and still give a consumer a better deal than our competition because we operate at a higher level. A consumer that pays to much attention to YSP, and not what is the best deal, can end up paying more for inferior service.

Numbers wise, the best deal is the best deal. APR is the only true measure of the best deal.

“Try running a mortgage business yourself without making any YSP. I dare you.”

I don’t propose to run a brokerage without charging YSP, that would be denying a consumer the right to finance their closing costs. Why would I do that?
I propose running a brokerage where 100% of YSP is disclosed and credited appropriately. Transparency and disclosure, 100% of the time.
I propose you read my comments more thoroughly…although I notice Todd did not post my response comment to his last comment…so I took upon myself to write the post he has linked to below.

“Who are you to decide how much the broker (or banker) can or will make on your loan? Is it your job to tell Wal-Mart or Target that they shouldn’t make over 50% profit on many of the items you buy (and surely they do)? Is it up to you to declare when profit is too much profit?”

Poor analogy by someone who does not intricately understand RESPA law. I will be happy to recite specific statutes that support my view.
Who am I to decide what should be charged, no one. But I can provide the transparent correspondent rate data that high volume bankers are currently privy too, directly to consumers, and allow them to decide what to pay per loan transaction (with some well-thought suggestions)…which will dictate what a given broker/banker makes.

I’m not casting stones, just keeping it real on how this business can (and will) be done.

My gaffe re: the very literal APR talk should not be mistaken for random and thought-less opinion.

I hope Todd posts this

Jeff, here’s another way to put it:

Who are you to decide how much the broker (or banker) can or will make on your loan? Is it your job to tell Wal-Mart or Target that they shouldn’t make over 50% profit on many of the items you buy (and surely they do)? Is it up to you to declare when profit is too much profit? That’s where capitalism becomes socialism. Try running a mortgage business yourself without making any YSP. I dare you.

Your only job is to get the best deal you can. If the best deal you can get pays the broker $5, $500, or $5,000, that is still the best deal you will get.

I stand corrected in the context of this discussion…I had the fact that if you payoff the loan sooner, your APR increases, and crossed wires… ADD in action

For the other comments, they simply represent a fundamental difference in our current business models, best left to a different conversation.
You appear to represent the minority: a banker that practices high levels of skill and ethics. Fortunately I get to ‘meet’ people such as yourself ‘at’ places like this. Where are you licensed to do business?

“APR only reflects the interest rate for the first year of the loan.”
No, APR is calculated over the life of the loan.

“Since consumers are relatively savvy enough to pick apart the laundry list of fees on a GFE and recognize that a higher APR = more expensive deal, brokers and bankers have evolved to hide expenses…using YSP’s.”

YSP is included in the ARP. If Broker A offers the exact same loan (lender-program-lock, etc) as Broker B does, but collects a YSP, he has to charge a higher interest rate to do so. Higher interest rate equals higher ARP. No way around it.

“Aren’t these two statements too closely related to separate them? If you are making YSP, my interest rate is higher than I qualified for, and now I am paying more money every month for the life of the loan.”

No, they are not related at all. What a borrower PAYS is way more important than what Broker A or B earns. I would have absolutely no problem knowing that one grocery store earns more profit than it’s competitor across the street. I’d shop at the one with the best prices, service and selection. If it’s the one making more money, more power to them. I work for one of the larger private mortgage bankers in the US. Because we can deliver such a huge volume of quality loans to investors, we generally get better rates than small brokers, or brokers who submit poorly processed loans. If I can beat the rates offered by a small broker, making a few more bucks while I’m at it, then I see nothing wrong with that. My obligation to the consumer is to provide them with the most competitive deal possible, not to earn less than anyone else.

I would like to address a few of your statements:

1) ‘APR, not YSP is the one simple number that determines who is giving you the best deal.’

APR only reflects the interest rate for the first year of the loan. It is really nothing more than a quick way to reference how much in ‘up-front’ fees a broker is charging relative to the loan amount.
Since consumers are relatively savvy enough to pick apart the laundry list of fees on a GFE and recognize that a higher APR = more expensive deal, brokers and bankers have evolved to hide expenses…using YSP’s.

2) It’s popular these days to link the terms YSP and evil, greedy, or corrupt, but the reality is that YSP is a part of nearly every loan, from good brokers and bad.

Very true. The problem is 8+ of 10 brokers and bankers solely use YSP to enrich themselves, never paying some or all of other 3rd party closing costs. Sounds like you are one of the few who discloses YSP’s properly.

3) If you want the best deal on a mortgage loan, you need to stop worrying about how much everyone is making, and focus on what YOU are paying.

Aren’t these two statements too closely related to separate them? If you are making YSP, my interest rate is higher than I qualified for, and now I am paying more money every month for the life of the loan.
So, if you are making, I am paying.
A mortgage weighs substantially heavier on my personal financial situation than a cup of coffee or saving $20/year on my homeowner’s policy.

I recently assisted a consumer who was dealing with a broker on a deal that had the best APR (after shopping) as is suggested in your post. His GFE showed $2000 in broker compensation (along with other typical 3rd party costs).
His interest rate was 6.5%. Seemed like a great deal.
24 Hours before closing the broker gives him a document to sign saying it’s OK for the broker to receive $18k in compensation from the lender (in return for ‘Delivering such a good, qualified client’). Turns out that this deal was paying 1pt in YSP. Without the YSP, the borrower would have received a 6% interest rate.
Over 5 years at the YSP inflated rate of 6.5%, the borrower would have paid $43,000 extra in interest.

While APR is a relative indicator of loan expense on one side of the transaction, it fails to consider the other side’s barometer, YSP. The devil is always in the details.