AgentMortgage

End of the ‘overage’ era

New lending rules aim to ensure access to cheapest loans

The real estate event of the summer
Connect with other top producing agents at Connect SF, Aug 7-11, 2017

Walk into a home-loan office and ask if "overages" are charged, and veteran officers will immediately begin coughing or winding their watches. Younger representatives would have to be told that an overage is a creative manipulation of a loan's yield-spread premium, or YSP. Some lenders deliberately take advantage and charge significantly more for a loan than is necessary. The practice was commonly known in the industry as an "overage," yet that was only one of its definitions.To managers, an overage had become a synonym for funds left over when the loan was sold for less to the secondary market than was charged the borrower. It was all about timing -- selling the loan when the time was right. Now, help is on the way. On Aug. 16, the Federal Reserve announced final rules regarding loan originator compensation practices. The stated goals of the new rules are to protect mortgage borrowers from unfair, abusive or deceptive lending practices, and to help ensu...