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New Yield Spread Premium Regulation & Its Impact on VA Home Loans

Tuesday, September 4, 2012 - Article by: VAMORTGAGE411 - Integrity Mortgage Group - Message

As many of you know, HUD recenty began enforcing its new RESPA guidelines effective January 1, 2010. Such changes are some of the largest that that the mortgage industry has ever seen. One of the most notable changes is in respect to yield spread premiums (YSP). HUD is now requiring that yield spread premium not only be disclosed on the initial GFE but also that it be credited back to the borrower at closing.

So what does this mean for Veterans looking for a VA loan? Well... the first thing is that veterans can now have the peace of mind of knowing, up-front, whether or not they are being quoted a "par" rate. The "par" rate is the rate at which there is not a rebate or cost associated with rate itself. Secondly, any rebate that is associated with the rate will be required to be credited back to the veteran at closing.

In conjunction with this, the VA has come out reiterating its refusal to lift its 1% origination cap on VA loans. This legislation is having a very detrimental impact on brokers trying to offer VA loan products. The reason for this is because without the ability to make a yield spread premium, or the ability to charge more than a 1% origination fee, brokers will be left making less than 1% on each VA loan that they offer, that is, after continuing to pay VA's non-allowable fees out of their own pocket. Accordingly, the VA loan program may no lose all of its profit incentives for brokers.

Accordingly, there are many that believe that the VA loan will become a loan program exclusively offered by banks. This is due to the banks' ability to make a service relese premium (SRP) which does not have to be credited back to the veteran at closing which allows the loan officer to make a profit margin similar to what has existed in the past.

The important question remains ... Will the loss of brokers ultimately lead to higher interest rates for VA loans due to the loss of competition in the VA loan marketplace? Many argue yes.

To speak to a VA loan specialist about these policy changes and how they are affecting VA Loan Rates, call 1-800-896-5333 or go to

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