Ethics · 18% of the SAFE exammedium
Correct answer: Prohibiting loan originator compensation from being based on the interest rate or other loan terms, preventing rate-based compensation steering
Post-Dodd-Frank Regulation Z loan originator compensation rules prohibit compensation to MLOs that varies based on the loan's interest rate or other terms (other than loan amount). This effectively eliminates the predatory use of YSPs, which previously incentivized brokers to originate higher-rate loans in exchange for lender-paid compensation at the borrower's expense. There is no 1.5% YSP cap under current law — the structure is prohibited, not merely capped. Disclosure alone does not make rate-based compensation permissible. No separate borrower acknowledgment requirement for YSPs exists under current federal rules.
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