The Fed’s recent decision to outlaw Yield Spread Premiums (YSP) paid to mortgage brokers by lenders is the latest success by the bank lobby to kill competition and bait and switch the public into thinking the government is actually doing something to reform the industry. It is, in fact, reaffirming a double standard that has existed in the industry far too long, and may be the death knell for mortgage brokers.
Some background: For ages, the more profitable the loan, the higher the commission paid to the originator. In mortgage brokerage, the commission has been Yield Spread Premium (YSP). For bankers and direct lenders, the commission is Service Release Premium (SRP). Even though they go by different names, they operate exactly the same: