Key Takeaway: For every $1 the broker earns, the borrower pays $2-$3 in excess interest they never see on a closing statement.
275 basis points. Maximum broker commission through the largest wholesale lender. On a $500,000 loan: $13,750 -- embedded in the interest rate you'll pay for years, not as a visible line item. You will never see this number on your closing statement. It's the most expensive fee in the entire mortgage process, and it's the one that's designed to be invisible.
The par rate game
Every mortgage has a par rate — the rate where the lender makes zero additional margin. When a broker prices at 102, they're selling $500,000 of mortgage at $510,000. The difference gets collected through a higher interest rate.
On a $500,000 loan at 7.375% versus par of 6.25%, the borrower pays an additional $150,000 over 30 years. On the average 7-year hold: $28,128 in excess interest. The broker took $10,000-$13,750. For every $1 the broker earns, the borrower pays $2-$3.
The invisible affordability hit
The rate increase reduces purchasing power. At par rate, $3,200/month qualifies for $500,000. At marked-up rate, same payment only supports $440,000 — a 12% reduction. Nobody tells the borrower.
Two layers of margin
The broker takes 175 bps. The wholesale lender adds 100 bps "gain on sale." Combined: 275 bps above par, hidden in the rate. Neither appears as an explicit fee.
LPC vs BPC
Lender Paid Compensation (LPC): Fee baked into rate. Appears on Closing Disclosure as "Paid by Others" — misleading language. The industry defaults to LPC because it's invisible.
Borrower Paid Compensation (BPC): Cash at closing. More transparent but requires real cash.
Market rates
Only ~25% of deals close at the 275 bps maximum — typically low-volume loans where the borrower doesn't rate-shop. Competitive rate: closer to 100 bps. At par pricing (0 bps), a broker wins nearly every deal.
The VIP tell
Some lenders run par-rate programs for executives and friends-and-family. The existence of VIP programs is proof the markup is discretionary. If par generates enough revenue for the bank's most valued relationships, the standard markup is extracting margin from borrowers who don't know to ask for better.
What borrowers should do
Ask for the par rate: "What is the interest rate at zero points, zero origination fee, and zero lender compensation?" Whatever they give you is the floor. Everything above it is commission.
The gap between what you're paying and what you could be paying is found money -- hiding in plain sight, inside the interest rate you'll pay every month for the next thirty years. The entire broker compensation model depends on you not asking one question. Ask it.