A mortgage loan originator (MLO) received a salary of 1% per loan plus a bonus...

Under Dodd-Frank Act regulations and Regulation Z (TILA), mortgage loan originators (MLOs) cannot be compensated based on the terms of the loan, such as interest rates, loan amount, or product type. This includes any financial incentives, like bonuses or rewards, tied to loan terms. In this case:

The trip to Hawaii was awarded based on closing loans with an interest rate of 5% or higher, which directly ties the MLO's compensation to a specific loan term (the interest rate).

This violates the Loan Originator Compensation Rule, which prohibits compensating MLOs based on the terms or conditions of a loan, in order to protect borrowers from steering into unfavorable loan products.

Therefore, all forms of compensation—including bonuses, trips, or other rewards—are scrutinized if they are tied to loan terms, making the MLO's trip to Hawaii an illegal incentive under current law.