Under the LO Compensation Rule, an MLO's compensation may be based on which of the following loan terms?

Correct answer: The loan amount

Under Regulation Z's LO Compensation Rule (12 CFR 1026.36), MLO compensation may be based on the loan amount because this does not represent a specific term or condition of the credit. However, compensation cannot be based on specific loan terms such as the interest rate, APR, LTV, or loan type (fixed vs. ARM), as tying compensation to these factors creates incentives for steering borrowers into less favorable loans. Loan amount is a permissible proxy for the value of the transaction.