Comments on: Chicken Little Cried, “The Market Is Falling!” http://www.livingbehindthecurve.com/2007/08/13/chicken-little-cried-the-market-is-falling/ Simple. Frugal. Fabulous. Wed, 19 Nov 2008 12:05:52 +0000 http://wordpress.org/?v=2.6.3 By: Mom http://www.livingbehindthecurve.com/2007/08/13/chicken-little-cried-the-market-is-falling/#comment-240 Mom Tue, 21 Aug 2007 03:26:25 +0000 http://www.livingbehindthecurve.com/2007/08/13/chicken-little-cried-the-market-is-falling/#comment-240 Hmmm, Yield Spread Premium....where do I start. I'm no expert either but after many years in the business I think the easiest way to understand YSP is to look at the opposite of YSP which would be "points", a term most people will be familiar with. One point equals 1% of your mortgage amount ie $100,000 mortgage at 1 point would be $1,000. You spend points to buy your mortgage rate down and you pay them at the time of settlement. So if you want to drop your interest rate from a quote of 6.5% to 6.25% you might be charged 2 points, ($2,000 on your $100,000 loan) So points are advanced interest you pay to bring your rate and consequently your payment down. Yield spread premium is the direct opposite. The bank is paying a fee to get a loan from you at a higher rate. Let's say PAR (where the bank will not pay nor will they collect a fee on an interest rate) is 6%. If you take a 6.25% interest rate a Yield Spread Premium will be paid on this loan. The problem is who is getting this money and was it properly disclosed and do you have a clue what the options were. Mortgage Brokers for the most part are required to disclose fees to customers but all to frequently they are not disclosing options, actual fees, where they make their money from and so forth. Oddly, the bank is not required to disclose in the same way. Trust me, banks make YSP's too. Here is where effective and fair use of the YSP can be made. When you need or choose a Mortgage Broker to help you get a loan and there are valid reasons to do so which I won't go into here consider how you are going to pay the Broker. They don't work for free, any more than any of us do. You can use the YSP to pay the broker and not pay in cash on the settlement sheet for instance. Agree to a flat fee in cash but require the mortgage broker to give you the credit for the YSP. (don't let them tell you they can't do that, they can). In other words, I don't think that the YSP is inherantly evil as my daughter believes but the Mortgage Broker who doesn't disclose, educate and help a buyer/mortgagor make informed decisions is. Not only that but all too frequently there are Brokers out there that don't really understand the process themselves and think that their job is to rape you for as much money as they can wrench from you and eat up all the equity you have worked for. Maybe it is time for me to start selling mortgages the right way. Personally, I think you should write for a living. I just love the way you tell a story. Well done. Hmmm, Yield Spread Premium….where do I start. I’m no expert either but after many years in the business I think the easiest way to understand YSP is to look at the opposite of YSP which would be “points”, a term most people will be familiar with. One point equals 1% of your mortgage amount ie $100,000 mortgage at 1 point would be $1,000. You spend points to buy your mortgage rate down and you pay them at the time of settlement. So if you want to drop your interest rate from a quote of 6.5% to 6.25% you might be charged 2 points, ($2,000 on your $100,000 loan) So points are advanced interest you pay to bring your rate and consequently your payment down.
Yield spread premium is the direct opposite. The bank is paying a fee to get a loan from you at a higher rate. Let’s say PAR (where the bank will not pay nor will they collect a fee on an interest rate) is 6%. If you take a 6.25% interest rate a Yield Spread Premium will be paid on this loan. The problem is who is getting this money and was it properly disclosed and do you have a clue what the options were.
Mortgage Brokers for the most part are required to disclose fees to customers but all to frequently they are not disclosing options, actual fees, where they make their money from and so forth. Oddly, the bank is not required to disclose in the same way. Trust me, banks make YSP’s too.
Here is where effective and fair use of the YSP can be made. When you need or choose a Mortgage Broker to help you get a loan and there are valid reasons to do so which I won’t go into here consider how you are going to pay the Broker. They don’t work for free, any more than any of us do. You can use the YSP to pay the broker and not pay in cash on the settlement sheet for instance. Agree to a flat fee in cash but require the mortgage broker to give you the credit for the YSP. (don’t let them tell you they can’t do that, they can). In other words, I don’t think that the YSP is inherantly evil as my daughter believes but the Mortgage Broker who doesn’t disclose, educate and help a buyer/mortgagor make informed decisions is. Not only that but all too frequently there are Brokers out there that don’t really understand the process themselves and think that their job is to rape you for as much money as they can wrench from you and eat up all the equity you have worked for. Maybe it is time for me to start selling mortgages the right way.
Personally, I think you should write for a living. I just love the way you tell a story. Well done.

]]> By: Mortgage Calculator http://www.livingbehindthecurve.com/2007/08/13/chicken-little-cried-the-market-is-falling/#comment-237 Mortgage Calculator Sat, 18 Aug 2007 16:57:11 +0000 http://www.livingbehindthecurve.com/2007/08/13/chicken-little-cried-the-market-is-falling/#comment-237 <strong>Chicken Little Cried, "The Market Is Falling!"...</strong> A look at the housing bubble....... Chicken Little Cried, “The Market Is Falling!”…

A look at the housing bubble…….

]]> By: Fabulously Broke http://www.livingbehindthecurve.com/2007/08/13/chicken-little-cried-the-market-is-falling/#comment-228 Fabulously Broke Mon, 13 Aug 2007 12:05:51 +0000 http://www.livingbehindthecurve.com/2007/08/13/chicken-little-cried-the-market-is-falling/#comment-228 I love this post because the one area I am TRULY lacking in, is mortgage knowledge (not having had the pleasure of having to shop for one, in anticipation of having my own home)... I'm going to save your post, and read it over when it comes time to get a mortgage, because I want to remind myself not to get too house-greedy... I love this post because the one area I am TRULY lacking in, is mortgage knowledge (not having had the pleasure of having to shop for one, in anticipation of having my own home)…

I’m going to save your post, and read it over when it comes time to get a mortgage, because I want to remind myself not to get too house-greedy…

]]>