🇺🇸United States

Pricing Errors from Undisclosed YSP Markups

2 verified sources

Definition

Brokers under-disclosed or miscalculated YSPs, leading to inflated effective pricing not matching par rates, causing revenue discrepancies when audited. Borrowers paid higher lifetime costs (e.g., 3.0% par to 3.5% with 0.5% YSP), but brokers risked clawbacks or lost lender relationships on discovery. Systemic opacity in paperwork hid true compensation totals.

Key Findings

  • Financial Impact: 0.5%+ loan amount per mispriced YSP
  • Frequency: Monthly - recurring in YSP-funded commissions
  • Root Cause: Complex par rate vs. offered rate differential not transparently itemized in disclosures

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Loan Brokers.

Affected Stakeholders

Commission Accountants, Loan Processors, Brokers

Deep Analysis (Premium)

Financial Impact

$0–$500 per catch (prevents future loss if caught pre-close; but losses occur when YSP not caught; estimated $1,000–$5,000 losses on loans where YSP not flagged) • $1,000 - $4,000 per refi with inflated YSP (0.5-1% on $200K-$400K refi; amortized over 15-30 years); 8-12 refis/month with pricing errors = $8,000-$48,000 monthly • $1,000–$5,000 per discovery (post-close YSP correction cost; potential regulatory exposure)

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Current Workarounds

Broker and investor communicate via phone/email; pricing worksheets kept in broker's local files; no rate comparison documentation; YSP amount never itemized on loan docs • Broker manually quotes rate on proprietary spreadsheet; lender provides rate sheet; processor assembles docs without YSP impact analysis; closing disclosure prepared last-minute with no borrower review • Broker quotes 'market rate for self-employed' verbally; no comparison to par offered to borrower; processor accepts rate without flagging; documents show rate but not YSP breakdown

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

YSP Disclosure Violations Leading to RESPA Lawsuits and Regulatory Actions

$100+ per $100 YSP in elevated borrower costs, with class settlements in millions

Unauthorized YSP Steering Inflating Broker Compensation

$7-$20 savings per $100 YSP for brokered loans, net loss to borrowers

Gain-on-Sale Revenue Leakage in Lender Matching

Undisclosed $ amount per loan; recurring across portfolio

Manual, fragmented document collection delaying approval and funding

If a broker originates $10M/month at a 1% commission ($100k/month), and slow document intake delays approval and settlement by 30%, the effective time-to-cash drag on working capital is equivalent to $30k/month in delayed commission realization and reduced capacity to close more loans.

Broker capacity consumed by chasing incomplete and inaccurate documents

If a broker or loan officer spends 25–30% of their week (10–12 hours) chasing documents and can instead reallocate this time to originating 1–2 additional loans per month at an average $2,500 commission each, the lost capacity prior to improvement is approximately $2,500–$5,000 per broker per month.

Client frustration and churn from complex, repetitive document requests

If poor document intake causes even 1 lost loan per month for a broker at a typical $2,500 commission, that is $30,000/year in directly attributable lost revenue; for a small brokerage losing 2–3 such clients monthly, the impact can reach $60,000–$90,000/year.

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