What is a premium to spread yield?
Mortgages are a special kind of loan that specially with the purchase of a house or real estate. The creditors use the property as a collateral against a loan. In return, the creditor may lend more money to the debtor for a lower interest rate. Mortgage brokers earn money from the sale of mortgage loans to potential buyers of home. The profit of the mortgage broker is referred to as a fee for the origin or bonus with yield.
The idea or concept of a yield premium is to motivate a mortgage broker to sell loans. Government sponsored entities (GSE), including Fannia Mae and Freddie Mac, usually use a bonus to the yield range to motivate mortgage brokers to sell a specific type of loan. In return, the mortgage broker pushes a certain type of loan to the debtor. For example, a loan that is $ 100,000 in the US (USD) with a price of 101.00% yield has a built -in discount of a loan of 1 percent of the value of the loan; The originator is a mortgage broker Nebmalobobchodní banka provides a loan.
For example, GSES may want to direct debtors into a certain class of interest rates. In order to motivate mortgage brokers to promote this GSE class, it will increase the yield of the income range for the interest rate they focus on. For example, a 5.00% loan can have a yield range of 1%. However, the loan of 5.50% will have a revenue range of 1.24% and 6.10% of the loan may have a yield of 0.95%. There is always no clear connection between the bonus of the decree and the interest rate that the borrower pays.
The yield premium is also used as a way to motivate mortgage brokers or retail banks to create more loans for specific credit programs. For example, long -term mortgages with fixed rates often pay a much higher range of yield than a mortgage with a shorter term or adjustable rate. The link depends on the borrowing program that promotes the GSE.
premium to spread yields used as a toolThey are not bad for motivational mortgage brokers. The concern between the regulators is that creditors and brokers do not have to publish the amount of bonuses fairly and consistently. Given the laws in the US, the mortgage brokers are obliged to publish the bonus of spreading the proceeds to the truth in the rental document that the debtor must initiate before starting the loan paper.