"Yield Spread Premium" processing fee on HUD

[AZ-Tax]

It does NOT state on the HUD this to be an org fee, discont fee, pts etc. Just processing fee for a "Yield Spread Premium".

Anyone had experience with this before and if so is it deductible?

[JohnH]

I've always treated YSP as points since it's almost always expressed as a percentage of the loan. Deductible in year of puchase and amortizable on a refi.

[Mike Mac]

It seems there are differences of opinions regarding the deductibilty of YSP. I see from some other boards that many believe this is not deductible by our clients due to the fact that the money is not directly paid by them.

Here are a few definitions from a google search:


A yield spread premium (YSP) is the money paid to a mortgage broker based on an interest rate above the lowest rate the borrower qualifies for ...
en.wikipedia.org/wiki/Yield_spread_premium

Also known as rebate. YSP is found in brokered mortgage transactions in which a rate higher than par is requested. In exchange for the higher interest rate, a lender will pay a rebate to the broker. ...

https://knol.google.com/k/john-crenshaw/mortgage-glossary/sb9qfrhpo735/2

This is a payment made by a lender to a mortgage broker in connection with a borrower's mortgage transaction. ...

https://www.escrowhelp.com/glossary.html

A rebate by a lender or investor to a local Loan Officer for closing a loan on a certain product.

https://www.primaryresidentialmortgage.com/index.php

The fee or bonus expressed in terms of points or percentage of the loan principal that is paid by the national mortgage company to the local loan ...

https://www.maureenrealty.com/glossary.htm

A payment to a mortgage broker from the lender for originating and processing a loan with a fractionally higher interest rate than the lender normally is prepared to offer borrowers (an “above-par” loan). ...

https://www.fraudproblem.com/definitions/

a kickback fee paid by a lender to a broker for selling higher interest rates.

https://www.ncrc.org/fairlending/glossary.htm

The dollar amount paid (generally to a broker) for a loan at an interest rate higher than the market or "par" rate.

https://www.carrollcountyrealtors.net/Financing/Glossary.htm

A markup in the interest rate to cover broker's fees. Example: You are approved for a 6% mortgage interest rate; however, you are charged 6 ...

https://www.ccvegas.com/mortgage_terms_R-Z.htm

[BP.]

Treatment of YSP depends on who the payer is. If the lender is paying a mortgage broker I don't take it.

[AZ-Tax]

From Tax Almanac forum YSP non deductible regardless

http://www.taxalmanac.org/index.php/Discussion:Are_yield_spread_premiums_deductible_as_points

94nole (talk|edits) said:
25 February 2008

Ken,
I am also a licensed mortgage and real estate broker and I beg your pardon, but the mortgage industry, at least in my tenure here in FL, does not consider YSP "points". As you well know, it is a premium paid by the lender to the broker for selling a higher rate of interest on the note. The taxpayer/borrower does not pay the yield spread premiums, the lender does. Obviously, the borrower may deduct seller paid points but this is not seller paid points

[JohnH]

It's clear that there is disagreement on the issue, but I've always applied the same principle as the one underlying seller paid points. Regardless of how the paperwork is written up regarding who pays what, much of what shows up on the HUD-1 is a shell game. What the mortgage industry calls it is among the least of my concerns because their job is oriented more toward confusing their customer rather than informing.

In the final analysis, the buyer pays everything because they're the one paying for the house via the loan & down payment, and they are the one paying the loan & interest. Unless a ruling or other guidance comes down specifically saying YSP cannot be considered points, I'm inclined to stick with the IRS definition of points.