California AG Jerry Brown is very interested in investigating loans made to borrowers with yield spread premiums (YSP).

Some people characterize these “hidden” fees as broker “kick-backs” that are essentially built into your mortgage by bumping up the interest rate, and the lender pays the originator of that loan extra money for doing so.

Brokers have taken the stance that it offsets a borrower’s closing costs. I feel that both views are true, but in recent years, yield spreads have been severely abused and YSP has been used mainly to produce more revenue for the loan officer, brokerage and the lender.

More cash per loan seemed to be the underlining theme of the subprime lending era, because the theme sure wasn’t “what’s best for the borrower.” Often loan officers were asked by their peers or managers, “What are you rev’ing on that loan? How much did you charge on the back end?” Read the rest of this entry »