We (bank) originate residential RE and sell our 30 year fixed rate loans to investors right after closing. When we set the rate with the customer, we do so based on the rate sheets our investors send to us daily and we pick the rate based on a number of factors. What the bank "makes" on that loan varies based on the interest rate. We can choose a number of different rates at different levels of profitability. That's been referred to as "price to par". This is separate from and in addition to the service release premium (SRP) we are also paid. We rate the lock the loan with the investor at the same time we lock it with the customer. We close the loan in our name with our funds and then immediately sell it to the investor, who funds us after they review the file we send them for purchase. If they choose not to buy it (because we missed something in their rules, then we have to buy it back) and pay back the price to par and SRP.

Here's my question - will investors still be able to offer various "price to par" options under the new rules? Isn't it essentially the exact same thing / concept as Yield Spread Premiums (YSP)? It is my understanding that the investors offer different price to par options based on the various mortgage backed security pools they are trying to fill.

Any read out there on how this practice will be impacted by the new compensation / steering rules (April 2011 or with Frank Dodd)?

The final rule states "The rule does not apply to payments received by a creditor when selling the loan to a secondary market investor"

That statement is made in a paragraph discussing "par" rates so I believe the price to par option will be exempt in this case, but the bank can't pass that on to the LO (which is what we currently do and will no longer be able to)