Q:What is "yield spread premium," and is it really paid by a lender?

A: Yield spread premium ("YSP") is a cash rebate paid by a lender to a mortgage broker for selling a loan at an interest rate higher than what the borrower may be qualified for.

For example, if a borrower qualified for an interest rate of 6 percent for a $250,000, 30-year mortgage, and the broker sold that borrower a comparable mortgage at a rate of 6.25 percent, the mortgage broker will receive a YSP from the lender. In this case, the YSP would be $625.

The YSP should appear on the closing statement and would be paid by the lender.

The payment of a YSP to the mortgage broker at closing benefits the borrower by allowing the mortgage broker to offer different mortgage options, including, but not limited to, the ability to close loans with zero or reduced upfront closing costs.

On the other hand, the borrower will pay more in interest over the life of the loan.

Mortgage brokers should be up-front about loan options and disclose if a YSP is being paid by the lender. The payment of a YSP is a generally accepted and appropriate practice, as long as it is disclosed and the borrower is given a good-faith estimate as to the amount of YSP and who and how it will be paid.

Q: What is joint tenancy?

A: An equal, undivided ownership interest in a piece of property by two or more people, each of whom has the right automatically to assume title to the property upon the death of the other(s).

This column is designed to provide information in regard to the subject matter covered. It is not intended to render legal advice.

By Patrick I. Lucas, associate with Weinstock & Scavo, PC, in Atlanta, plucas@wslaw.net.

Have a question you would like answered in this column? Please contact Jim Scavo at jscavo@wslaw.net or send your question to Jim Scavo, Weinstock & Scavo, PC, 7 East Congress St., Suite 1001, Savannah, GA 31401.