Am I correct in stating that the ysp paid by lender to bank (secondary market transaction) is a prepaid finance charge?

Do you mean SRP (Service Release Premium)?

If the borrower is not paying fort it, then it is not a finance charge.

I'm not familiar with SRP. I am talking about yield spread premium in regard to secondary mortgage lending, when the bank is the "go-between" with the customer and the secondary market lender. Thank you though.