But the borrower pays for the rebate over time through the higher interest rate. I recently acquired a database covering 774 loans brokered in December 2000 and January 2001. On these loans, rebates accounted for about three-fifths of broker income. Only one loan out of five had no rebate at all. Information on lender rebates is difficult to get.
Many brokers view it as none of the borrower's business.
Many borrowers miss it or don't understand it. At the closing table, the real lender provides the funds needed for the broker to close the loan in the broker's name. The sale price is based on the rebate. In the case of the 8 percent loan with the 1.7 rebate, for example, the broker would sell the loan for a price of 98.30 percent of the loan amount. In this way, the rebate is concealed forever.