A yield spread premium, commonly known as a “YSP,” is a kind of compensation received from the originating lender by a mortgage broker acting as an intermediary for selling an interest rate to a borrower that is higher than the lender’s par rate for which the borrower qualifies.
The YSP can be used to pay loan charges, ensuring that the borrower is not responsible for any additional fees. Since the passage of new laws in 1999, the yield spread premium must now be properly connected to the services provided by the mortgage broker to the house buyer. When the loan is finalized, the yield spread premium must be declared on the HUD-1 Form.