Yield Spread Premium

A form of compensation that substantially inures to the benefit of a mortgage broker who is acting as the intermediary on the subject loan. The Yield Spread Premium is generally reflected on the settlement statement as a credit to the borrower which serves to offset the origination charges which are in part used to pay compensation to the mortgage broker. The Yield Spread Premium is generally calculated using the capitalized value differential between the loan’s interest rate and the mortgage investor’s stated par rate. The yield spread premium must be disclosed on the HUD-1 Form (the settlement statement) when the loan is closed. There is no such thing as a no-cost mortgage for the borrower.