I'm looking for opinions. The Bank has an applicant that doesn't qualify under our program and underwriting guidelines. The Bank has a mortgage company partner that is willing to do the loan (broker it). The loan closes in our name and then we sell it said broker. The customer has no $$ so we cannot charge an origination point so we increase the rate and the bank will make a 1.5% YSP on the loan. We will disclose the YSP on the GFE and HUD as such but I'm trying to figure out if this is a section 8 violation. Any opinions? Specific cites? Anyone doing this type of thing? HELP, thanks.

Does no one do something similar? I'm desperate!!!

IMO, this would not be a Sec. 8 problem. (Sorry, I didn't see this earlier.)

Thanks Dan. Am I right in saying we only need to make sure we disclose the YSP on the GFE and HUD?

I don't deal with YSPs, so verify what I am about to say, if you are funding the loan then I do not believe you have to disclose the YSP, but if the loan is being table funded by the entity you're selling to then it does.

I agree with Dan.

1) Probably no Section 8 problem unless your district hates YSPs or facts in your case make it clear that the YSP is "something for nothing" (which doesn't seem to be the case).

Check the HUD policy statement 2001-1 here.

2) If your bank closes the loan in its own name AND funds the loan, then Section 8 doesn't apply and the YSP doesn't even need to be disclosed - it's part of the secondary market transaction not subject to RESPA. (See the definition of "table funding" in 3500.2 and the exemption for secondary market transactions in 3500.5.)

If it's a table funded transaction, then the YSP needs to be disclosed as you've noted.

Sorry for the question, but can someone tell me what "YSP" is?

MN Banker......don't feel bad, I don't know what it means either.

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