Yield Spread Premium Abuse `Rampant,' says Consumer Group
WASHINGTON - The Homeowner's Consumer Center and its partner the National Mortgage Complaint Center have released the results of their 2006 survey of common mortgage fee overcharges/mortgage lender abuse, and topping the list are yield spread premiums. The survey is based on a sample of 7,500 mortgage transactions in every state and region of the U.S. According to the Homeowner's Consumer Center, YSP is "by far, the most abusive or the most poorly understood mortgage fee in the U.S." The YSP, it advised, shouldn't be confused with points or other fees a mortgage lender could charge a consumer. The YSP is a "rebate" or a "kickback" the mortgage firm or lender receives for increasing a borrower's interest rate over the best rate available for the borrower. In more than 95% of the cases surveyed, the borrower never understood what YSP was or that it translates into a high monthly mortgage payment for the borrower. Second on the list was the trend among regional and national homebuilders to become mortgage brokers and forcing consumers who are building a home to use the "overpriced" mortgage product of a homebuilder. Also making the list in ranking order beginning with number three were: title insurance; borrowers not getting their Good Faith Estimate or Truth in Lending Statement within three business days of making application for a home loan; loan application fees; high charges for credit reports; mortgage administration fee; document preparation fees; loan discount fees; and Internet mortgage or TV mortgage "Pitch Men."