Rebated discount points are now referred to as "yield-spread premiums" and it’s important to you that they are DISCLOSED to you and CREDITED to you!!! Unfortunately, it has been a common day-in, day-out nationwide practice for many of my competitors to "pocket all or a portion of any yield-spread premium." This is your money folks! It should be applied against (thereby reducing) your closing costs! If you choose a high enough rate which carries a large enough rebated yield-spread premium, you may wipe out or offset all your other loan costs—you’ve heard of "no-cost loans?" That’s all a no-cost loan is…..a higher rate of interest loan, where the lender pays the other loan costs from your yield-spread premium!  (By the way, this can be a very wise approach to refinancing, and I recommend it, as long as you are getting the full benefit of the yield-spread premium).

Historically, people in my capacity, who were already charging a loan fee, would quote an interest rate with a corresponding discount point charge which actually exceeded the discount point charge required by the mortgage lender, and then pocket the difference…this practice was called "collecting an overage." I’m unsure of the extent of this practice now because new disclosure laws are in place. Also, the mortgage lenders were coming under serious scrutiny for allowing bankers and brokers to collect overages. Now, fortunately for the borrowers’ sake, the mortgage lending community wants the closing documents to clearly state the exact discount point charge the actual lender has required. Regardless, my clients need not worry about such things.