A question was posed by our field. Some are under the impression that if a loan is not locked and a GFE has been provided by the broker that a new GFE is required once the loan is locked so a more accurate YSP is listed. I always thought the GFE was an estimate and re-disclosure is not required. What if the GFE shows YSP as 0-3% range and it ends up being 5%, do you police the cost according to the GFE? Can someone direct me to the Reg or OSC relating to this topic?

RESPA actually says very little about the GFE. And, it also does not say anything about reissuing the GFE if the fees change. This would be up to your company policy and procedure. IMHO it is prudent to issue revised figures if the applicant's closing costs vary significantly from what the initial GFE indicated just so the applicant is not surprised at closing. They should not go to closing angry because the originator did not give them sufficient notice that their fees were higher than anticipated.

Also, why is there such a huge difference in the YSP? Is the broker making that much more on the loan?

I usually don't list the YSP on the Good Faith, we always list it on the HUD-1. Is this wrong?

According to Part 3500, Appendix B, Illustrations of requirements of RESPA, you must disclose yield spread on the GFE (see #13 below):

Facts. A is a mortgage broker who provides origination services to submit a loan to a Lender for approval. The mortgage broker charges the borrower a uniform fee for the total origination services, as well as a direct up-front charge for reimbursement of credit reporting, appraisal services or similar charges.

Comments: The mortgage broker's fee must be itemized in the Good Faith Estimate and on the HUD-1 Settlement Statement. Other charges which are paid for by the borrower and paid in advance are listed as POC on the HUD-1 Settlement Statement, and reflect the actual provider charge for such services. Also, any other fee or payment received by the mortgage broker from either the lender or the borrower arising from the initial funding transaction, including a servicing release premium or yield spread premium, is to be noted on the Good Faith Estimate and listed in the 800 series of the HUD-1 Settlement Statement.

We close the loan under our name and then we sell to the investor. Sometimes we know when preparing the GF what the YSP is, but sometimes we don't. What do you suggest?

I would use a spread. Since it's not a direct cost to the borrower at any rate...it shouldn't affect the bottom line irregardless of what the final amount ends up being.

Now that I think about it. I think we are not required to disclose at all in the GF or the HUD the YSP if we close in our name and then sell the loan. Even though that is the intention all along.

Our external auditor indicates we cannot use the acronym "YSP." We must always spell it out. Most GFE's I see show the acronym. Anyone else encountering this?

You really should spell it out.

Your auditor is correct. Refer to FIL 21-99, dated 3/12/099. HUD has issued a policy statement clarifying YSP's. Here's a paraphrase from a newsletter we wrote pertaining to this topic:

HUD reiterated that mortgage brokers are required to disclose estimated direct and indirect fees on the Good Faith Estimate (GFE) not later than three days after application, with exact fees provided on the HUD-1 or HUD-1A at closing. However, the disclosure must be understandable to the consumer. As an example, HUD stated that “YSP to DBF, POC” would not be acceptable, but “mortgage broker fee from lender to XYZ Corporation (P.O.C)” would be appropriate. The policy statement further encourages mortgage brokers to inform customers of their fees and services as early as possible in the process and before the Good Faith Estimate, although there is no legal requirement that they do so.

At a former lender, we had a similar situation. Although the rate has not locked, IMHO, the lender is still required to put the information, either by a best guess based on how the broker historically closes loans, or by a range.

When purchasing loans, if the loan was locked, our input made sure the YSP was included on our GFE's. If not locked, we stamped all GFE's with a "range stamp".

We had belonged to a 49 lender cooperative (TX lenders included) and virtually all used the stamp. "Competetive disadvantage" - is a good excuse until the regulators/auditors come in and tell you to do it or else. It didn't hurt our business one bit.

Thanks SC-Banker. I re-read the RESPA Appendix B question and I think it (along with HUD's 1999 policy statement) will give me the ammunition I need. It's not like his range (for unlocked loans) can't start with 0% and even he admits that if the loan were locked, he would disclose any applicable YSP.

Is is acceptable for the range to be a percentage or is a dollar range required? I was having a discussion with a branch manager earlier in the week and she advised that most brokers prefer to include a percentage range in lieu of a dollar range. We have been requiring a dollar range, however, I am unable to locate anything in RESPA that specifically states dollar amounts are required. Thoughts? Thanks in advance.

I am unable to locate anything in RESPA that specifically states dollar amounts are required. Thoughts? Thanks in advance.

Agree. we use percentage ranges all the time, expressed as a percentage of the loan or as a % of every thousand dollars.

I found in one of our RESPA manuals where HUD was asked how YSP should be disclosed on the GFE. Among other verbiage, the response suggests YSP to be reflected as "$_____ to $______." IMHO, switching back and forth from %s to $ amounts can be confusing for a consumer.

I would like to bring this thread back up. We have sales managers that are stating that the regs do not specifically indicates "YSP" has to be spelled out or in dollar amounts. The sales managers are really fighting compliance on this. They state that their brokers are not being required to spell out YSP or disclose it in dollar amounts by any other lender. Some of the brokers have threatened to move their business elsewhere because of this. Is anyone else coming across these issues?

Remember who the board will come down on in the event it is a substantial critisism during an exam - not the loan officers. It's their job to put the loans on the books - yours to make sure the loans comply.

If you're on good terms, contact the regulator - contact the "any other lender" - their compliance officer should be willing to talk to you. Maybe they're getting the same story from their sales managers. Re-read Dave Dickinson's reply above and HUD's opinions too.

I gave them that policy statement and their response is HUD still doesn't say YSP has to be spelled out. HUD switched from using YSP to "mortgage broker fee." This is what we are up against.

FYI - my co-worker contacted HUD and was advised of the following: "The yield spread premium should be stated in dollars to insure that the consumer can understand the amount to be charged. Although there are no requirements to do so, yield spread premium should be spelled out for the same reason." Our examiner's response (OCC) was almost identical to HUD's.

Does the term "yield spread premium" have to be used? We have some brokers who do not want to utilize this term so they do not have to explain its definition and purpose - which is to lower a borrower's upfront costs.