Mortgage Broker, Lender or Other Industry Bond

Who is Required To Purchase Mortgage Broker/Lender Bond?

Every state has a bonding requirement for mortgage brokers, lenders, and servicer's.

Let's briefly recap the difference between these license types:

Mortgage Broker

A mortgage broker acts as an intermediary between borrowers and lenders.

A broker helps a bower identify the best lender and mortgage product for the borrower's financial situation.

Mortgage Lender

A lender is the professional who provides the loan.

Typically, this is a financial institution, but not always. In many cases the lender will keep their loan and service it as well.

Mortgage Servicer

A mortgage servicer is a company that handles the day to day tasks of managing the loan. They send the mortgage statements, provide customer service, and collect payments.

While each state requires a mortgage professional to get bonded, the bond amount will be different from state to state.

What is a Mortgage Broker/Lender Bond Amount?

The bond amounts are set at the state level by the responsible licensing agency. This agency can be the:

• Officer of the Commissioner of Consumer Finance
• Department of Regulatory Agencies
• Department of Financial Protection and Innovation

The bond amount is the maximum coverage available to your customers and the state in the event of a valid claim against your bond.

Each state's licensing agency is different and most states have a tiered structure where the bond amount increases based on the dollar volume of loans sold.

South Carolina is a good example:

• 0 to $49,999,999 requires a $50,000 bond
• $50 million to $249,999,999 requires a $100,000
• Over $250 million requires a $150,000

Other states, like Colorado base the bond amount on the number of licensed brokers in the company.

• Individual is $25,000
• Group up to 20 licenses is $100,000
• Group more than 20 licenses is $200,00

And some other states have a single bond amount for each type of license type, like Georgia:

• $150,000 for brokers
• $250,000 for lenders

Your license application will have the specific bond amount you'll need to purchase.

Again, the bond amount is the amount of financial coverage available to your customers and the state in the event a valid claim is made against your bond.

Why is a Mortgage Broker/Lender Bond Required?

To recap, a mortgage surety bond is a form or insurance that acts as a guarantee that you will:

• Follow all the regulations and laws in your state
• Service your customers with their best interest at heart

It's unfortunate, but every year there will be a handful of licensed mortgage professionals who purposefully harm their customers or break laws to increase profits.

Examples of this misconduct and fraud include:

• Approving a borrower for a loan that the borrower can't afford to repay
• Helping a specific borrower get approved for a loan by providing false information
• Hindering other borrowers from getting approved by falsifying application information
• Pushing borrowers into loan products that are not appropriate for them... to secure higher fees
• Charging unlawful fees

If a mortgage professional is guilty of any of these acts, the customer or state can make a claim against the bond for financial recourse, but only up to the amount of the bond.

What Is The Cost of a Mortgage Broker/Lender Bond?

The cost to purchase a mortgage broker or lender surety bond is based on a rate quoted by a surety. A surety is the insurance company that underwrites surety bonds.

Every surety will determine this rate using a combination of these factors:

• The personal credit of the applicant
• Business and industry experience
• Prior bond claims from previous licenses or other states

While each surety (generally) uses these same factors to determine a rate, they also use their own underwriting guidelines and thresholds. This means the rates quoted by each surety can vary by a large enough margin to save you hundreds of dollars on the price.

BOX: Quoted Rate x Bond Amount = Price You Pay

This is why it's so important to use a surety agency like Surety Bonds Direct.

We use a network of A rated sureties and price shop for you to find the lowest possible price for the bond you need.

Let's look at examples of different rates and prices for a mortgage surety bond amount of $100,000. You'll be able to see how the rate can impact the price.

These example prices give you an idea of what to expect, but get your exact pricing today.

Request pricing and we will hit the phones to find you the lowest price.

This costs you nothing and when you do get pricing, you're under no obligation to purchase. You have nothing to lose to know your exact pricing today.

How Long Does a Mortgage Broker/Lender Bond Last?

All surety bonds have a term. The term is the length of time the bond remains active before it must be renewed for another term.

Mortgage broker and lender bonds have a 12 month bond term from the effective date. The effective date is the date your bond becomes "active". You choose the effective date when you purchase your bond.

This is another great reason to work with Surety Bonds Direct. We manage this process for you.

As your bond expiration date approaches, your bond specialist will reach out to you 30 to 40 days in advance to make renewing your bond fast and easy.

Renewing is as simple as paying the renewal premium.

If your bond specialist can find you a less expensive bond premium, they will.

What Happens After You Purchase Your Mortgage Broker/Lender Bond?

Once you complete your purchase, our bond issuance team will get to work to prepare your bond with the:

• Correct bond form
• Necessary signatures
• Seals
• Power of Attorney

All mortgage broker bonds are filed with an association called the NMLS (Nationwide Multi-state Licensing Service).

We will register and file your bond for you with the NMLS.

Once we file the bond for you, we'll notify you and you have to electronically sign it and mark it ready for the regulator.

Don't worry, we guide you through this process to make it easy for you.

Getting Your Mortgage Broker/Lender License

Getting your mortgage broker, lender, or servicer license is done at the state level and most of the time, managed through NMLS as well.

Click here for professional mortgage licensing guidance.

Click here to get started with the licensing process through NMLS.

Each state has its own:

• Fees
• Financial statements
• Professional standards
• Bond amounts
• Application process
• Mortgage call report
• Temporary authority to operate