Definition
Yield spread premium is compensation lenders pay mortgage brokers when they negotiate rates higher than wholesale. It creates potential conflicts of interest—brokers could prioritize higher rates for personal compensation. TRID disclosures must clearly identify this compensation.
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Yield spread premiums allow brokers to offer lower rates by giving up part of the spread, or to increase compensation by offering higher rates. TRID disclosures must clearly identify this compensation. Some view yield spread premiums as potential conflicts of interest.
Pro Tip
Ask your mortgage broker directly about yield spread premium and ensure they're acting in your best interest, not taking excessive compensation.
Example
A broker arranges a loan at 6.25% when the wholesale rate is 6%. The lender pays the broker yield spread premium for the extra 0.25% rate.