As of April 1st, 2011, mortgage originators will no longer be allowed to collect Yield Spread Premium (YSP) - a fee associated with a refinance or purchase transaction but paid for by the actual bank.

What is YSP and how does it work? - Good question. FHA and Non-FHA mortgage brokers charge a fee for the service they provide. This fee can be paid to the broker in 2 different ways: 1) in the form of "points" - a fixed fee charged directly to [you] the consumer at closing or 2) Yield Spread Premium (YSP) - a fee charged by the broker that is paid for by the bank.

Why can this be bad for you? - Brokers use YSP and a negotiation tactic for consumers. Picture yourself as a mortgage loan officer (mortgage broker) - You have a client who is purchasing a home but the client stated that they do not want to pay any up-front "points" in hopes of lowering their total closing costs on the loan. In many cases the mortgage broker will be understanding and waive all or most of the up-front fees being charged to the client, incrementally raise their interest rate and in doing so, the bank who is actually giving the loan will pay the broker's fees.

As of April 1st, 2011, mortgage originators will no longer be allowed to collect Yield Spread Premium (YSP) - meaning that if they are going to make money for the service they provide, it will most certainly come out of the consumer's pocket.

This might be a good thing...Remember - Before April 11th, 2011, brokers could actually get paid by the lender for giving you an interest rate that is above market value. They are no long allowed to do this which means that if you can afford to pay the service fee up-front, your FHA or non-FHA broker may be able to offer you an interest rate that no bank or direct lender can!

Conclusion. At the end of the day just be aware that this is a reality. Ask your mortgage broker "how many points" he/she is charging, get a "Good Faith Estimate" from them and always be conscious of the fees associated with your loan

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