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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121114  
Subject: Re: Can I deduct these "points" Date: 1/28/2004 6:36 PM
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1) The Flat fee was $500, so that doesn't match with the $1800.
2) Looking at the settlement stateement, this is exactly what was written concerning this amount:
810. "Yld Sprd Prm Pd by Lender" <Mortgage Broker> POC$1794.58L

Note that this was not under origination fee or points paid, it was apparently a yield spread premium paid by lender.

Again, this amount showed up on my 1098 in the "points" box.


Whoops - now it sounds like there is a mistake (granted - its in your favor) on your 1098.

A "Yeild Spread Premium" is the lender paying the broker for the broker's services. It can be thought of, from your standpoint, as negative points. As you might already know, if you pay points, you get a lower interest rate. It works the other way as well. If you pay a higher interest rate, the lender will pay your broker money that can be used to pay for your expenses and/or the broker's compensation.

It sounds to me like the minus sign got lost in the translation and the negative points are showing up as positive on your 1098.

In this case, I would ignore the points reported on the 1098 and not report anything on your return. The flat fee that you paid is not really in the nature of points - it isn't based on a percentage of the loan.

--Peter
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