KMS Blog

Knightlines Mortgage Services, LLC has taken its transparency policy to the next level by offering a flat fee mortgage program.

What is transparency? Transparency is full disclosure. Many mortgage companies and their loan officers/brokers disclosure only what is required by law to disclose. One of the items that is not specifically required under "full" disclosure is that of Yield Spread Premiums (YSP). YSP is a fee paid by the lender to mortgage companies for the charging of a higher interest rate to a borrower. Many companies and their loan officers/brokers opt out on disclosing this fee to their clients. Often times, this fee is only mentioned at the closing table by the settlement agent. And even then it is quickly dismissed because of the fact it is marked as a "Paid Outside of Closing" fee from the lender. Borrowers are left in the dark that this fee is indirectly paid by them as a result of the mortgage company selling them a loan with a higher interest rate.

Some mortgage companies disclose a range in what could be paid out in YSP to them. Often times, a borrower can find this on the Good Faith Estimate of Costs or on the Mortgage Broker Fee Agreement. The fee is usually expressed as a "Paid Outside of Closing" fee and expressed a percentage ranging from 0-4%. This is a step in the right direction, but it is still not a full disclosure of the exact amount to be paid.

In October of 2007, the State of Florida is going to force all mortgage brokerage businesses and correspondent lenders acting in the capacity of a brokerage and their loan officers/brokers to become 100% transparent. Borrowers must be provided in writing a disclosure of the exact fees paid to the company by the lender. This disclosure is to be given within 3 days of knowing the exact fee, but not less than 3 days prior to closing.

When does the company know how much it will make? This is a very simple answer. The minute a company locks your rate, they will know how much YSP they will receive.

This amendment to Florida Statute 494 will open the eyes of many borrowers on just how much mortgage companies charge both directly and indirectly to their clients.

Knightlines Mortgage Services, LLC has always believed in full disclosure of its fees. Because of this, we have already been in compliance with the new laws. As a result of the competition now being forced to do what we have been doing, we are making a bold move to adopt a philosophy that is often frowned upon by many in the mortgage industry: a flat fee service.

Many companies charge points, hide fees, or raise the rate to get paid in YSP. With our flat fee program, borrowers will know upfront exactly what the loan will cost them. There are no hidden fees. There is no YSP. No YSP equals the lowest possible rates to borrowers (or “Par” rates).

Knightlines Mortgage Services, LLC will also offer to its clients an option that only a small handful of companies nationwide offer. This option is to use YSP for its original purpose: a way to pay closing costs. We will offer our borrowers the option to take a higher interest rate and use any proceeds obtained from an YSP to pay closing costs or put towards a down payment. We will not use the YSP to pay ourselves. In fact, if for some reason there is no true Par Rate (0 YSP), we will automatically credit those fees from the YSP to the borrowers closing costs.

With all that is happening in the mortgage and real estate industry, Knightlines Mortgage Services, LLC will continue doing what it can to ensure that its clients receive the best in service, fees, and rates. Being honest and upfront with our clients is what keeps us in business. By adapting our current philosophy to the flat fee service, we know that we will be miles ahead of our competitors and that our motto will still hold true: Financing the Way It’s SUPPOSED to Be!