YSP Calculation

Hi Sagar,

I am not getting your example.

What I know. YSP (Yield Spread Premium) is the cash rebate paid by lender to broker based on the selling an interest rate above the wholesale par rate that the borrowers qualifies for. For example, if broker offers a borrower a loan amount of $200,000 at an interest rate of 5.5% and the par rate is 5%, then he will earn YSP equal to 1% of loan amount. This is paid by lender to him as a rebate.

Thanks

Hi Helping User,

Let me explain you what I am trying to find out :

A Lender has published a Rate Sheet which has AT PAR Pricing and in the adjustments he has published a YSP Table as follows :

Buy-Up : 2:1 Upto Max Cap of 105
Buy-Down : 1:1 Upto Min Cap of 102

I just want to know that how the calculation of 2 :1 / 1:1 is performed to achieve the increment of rate and price in Buy-Up and decrement of Rate and Price in Buy-Down.

Regards

Sagar

To be honest with out seeing the actual rate sheet those numbers don't make a lot of sense. On an Alt-A loan product first mortgage there isn't anyone that I am aware of that pays 5% in YSP......they are all capped between 2-3%.....If you can cut and paste the rate sheet it might help. Just out of curiosity how did you get a mortgage rate sheet.....that is considered proprietary information.

Hi,

You won't come across Lenders giving YSP's for ALT A or Prime Loans but u will find this scenario more over in SubPrime Programs / Heloc / Heloans ....

Can't anyone help me here for the calculation !!!!!

Regards

Sagar

Sagar,

Of course lenders give YSP on prime and alt-a loans.......every one of them does.....why would brokers send them business other wise. I have never seen a YSP calcultion done that way.......Every increase in YSP results in a higher coresponding rate...in other words as an example on if the par rate is 7% then the first point in ysp is a .50% add to the rate but the second point in ysp is .750% add to the rate.

Hi Cedric,

Well I think I shud give u the rate sheet which has YSP info, but according to my experience and study in US Mortgage Domain I have hadrly come across Lenders who publish YSP ( BuyUp / Buy Down ) for ALT A , Prime Programs.

All I have seen such tables are for HELOC'S / HELOAN'S / SubPrime Program like Core Programs etc.

Anyways can u please copy paste an ALT A or Prime Rate Sheet which has YSP ( BuyUp /BuyDown ) table published I would definitely like to check it.

Right now I am a bit busy my next post will have copy paste of the rate sheet which I am studying .... I have worked a calculation where we can actually break down the RATIO and get the PRICE TABLE.

But I am not sure so wanted someone to verify and confirm the same.

Regards

Sagar

Hi Sagar,

I can't cut and paste a ratesheet it is proprietary information and would violate my broker agreement. So you will have to take my word on it. There isn't any "calculation" that is used on conforming loan products.....the yield is based on the bond market and changes every day and sometimes Through the course of the day

Here is an example of how a conforming rate sheet might look. the numbers in the ( ) indicate how much the broker is getting paid at that specific rate. Of course this does not show any adjustments to the rate for loan to value or approval level or occupancy etc.......but you can see there is no clear formula.

6.000% 2.250
6.125% 1.625
6.250% 0.875
6.375% 0.250
6.500% (0.375)
6.625% (0.875)
6.750% (1.500)
6.875% (2.125)
7.000% (2.625)
7.125% (3.000)

Dear Cedric,

Thanks for your information, but I can explain you that YSP BuyUps and BuyDowns involve calculation, is it possible for u to chat with me sometime.

I think I have found the formula to calculate but need to verify it again.

But I am more curious that how does a Lender calculates it I mean by what formula.

Let me know

Regards

Sagar