What is a Michigan Mortgage Loan Originator or Broker Bond?
Mortgage brokers, lenders, and servicers are required to purchase a surety bond as part of the requirements to have a license issued and renewed.
This surety bond is called a mortgage broker bond or a mortgage lender bond depending on the specific license you're applying for.
This surety bond is required by the Michigan Department of Insurance and Financial Services and it acts as a guarantee that you will:
- Follow both Federal and Michigan mortgage broker, lender, and servicer laws
- Follow the licensing regulations including renewal procedures in Michigan
- Service your customers with fair business practices and ethics
When you purchase your Michigan mortgage broker, lender and/or servicer bond, you're making this promise to the Michigan Department of Insurance and Financial Services and to your customers.
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Who is Required To Purchase a Michigan Mortgage Broker Bond?
All mortgage brokers (or originators), mortgage lenders, and mortgage servicers are required to purchase a surety bond to legally conduct business in the state.
There are some interesting rules about how bonding works, but first lets cover the difference between a broker, lender, and servicer.
A mortgage broker, also called a mortgage originator, is responsible for connecting the borrower to the right mortgage loan and lender for their budget and needs.
A mortgage lender is responsible for providing the mortgage loan. In some cases the lender will keep the loan on their books and service the loan. Other times, they will sell the loan to investors.
A mortgage servicer is responsible for collecting the payments for the loan and managing the day to day servicing of the loan paperwork.
Individual Mortgage Brokers (Originators)
If you're an independent broker or you're not sponsored by a licensed company, you must purchase an individual mortgage broker bond.
Company Mortgage Brokers, Lenders, and/or Servicers
If you're a mortgage company licensed as a broker, lender, and/or servicer, you must purchase a company mortgage broker bond.
The bonding amounts change based on:
- The total dollar amount of mortgage written during the previous 12 months
- Whether the loans are in first or second position on the property
Bottom line, if you want to legally broker, lend, or service mortgage loans, you must purchase a mortgage surety bond.
Why is a Michigan Mortgage Broker Bond Required?
The Michigan Department of Insurance and Financial Services is responsible for setting the licensing requirements for mortgage brokers, mortgage lenders, and mortgage servicers.
The licensing process, alone, is required to ensure the businesses and individuals in the mortgage industry have the appropriate:
- Education
- Experience
- And paperwork in place
The licensing process exists to prevent bad actors from getting into business for the purpose of committing fraud.
Yet, even with these licensing standards in place, every year there will be a handful of licensed mortgage professionals who purposefully:
- Approve a borrower for a loan they can't afford
- Help a borrower get approved for a loan by providing false information
- Hinder borrowers from getting approved by providing false information
- Pushing borrowers to high commission loans to make more money
- Creating and charging false fees
If a mortgage broker, lender, and/or servicer is found guilty of these acts or similar acts, the customer can make a claim against the individual or company for financial compensation. The level of protection ends at the mortgage bond amount.
What Are The Michigan Mortgage Broker, Lender, and Servicer Bond Amounts?
Individual Mortgage Broker/Originator Bond Amounts
If you're an independent broker or not yet sponsored by a licensed company, you must purchase a surety bond with the appropriate amount.
| Mortgage Loan Amount | Bond Amount |
|---|---|
| $0 to $12,000,000 | $10,000 |
| $12,000,001 to $24,000,000 | $25,000 |
| Greater than $24,000,000 | $50,000 |
If you become sponsored by a licensed company, you can be included under the company surety bond and you no longer have to have an active individual bond.
Company Mortgage Brokers
The bond amounts depend on whether you're writing first mortgages and/or second.
A first mortgage is a loan that will collect assets to pay off the loan first if the property owner ever enters a foreclosure or bankruptcy scenario.
A second mortgage is a loan that only collects assets after the first mortgage has been paid off and if there any assets left over in the foreclosure or bankruptcy scenario.
First and Second Mortgages
| Mortgage Broker Notes | Bond Amount |
|---|---|
| If collect fees from the borrower before the loan is issued | $25,000 |
| If you only collect fees after the loan is issued. | $0 |
Company Mortgage Brokers and Lenders
If you're licensed as both a mortgage broker and lender, your bond amount is $25,000 for both 1st and 2nd mortgages.
| Mortgage Broker Notes | Bond Amount |
|---|---|
| 1st Mortgage Broker/Lender License | $25,000 |
| 2nd Mortgage Broker/Lender License | $25,000 |
Company Broker, Lender, and Servicers
If you're licensed as a broker, lender, and a mortgage servicer, your bond amount is $125,000 for both 1st and 2nd mortgages.
| Mortgage Broker Notes | Bond Amount |
|---|---|
| 1st Mortgage Broker/Lender License | $125,000 |
| 2nd Mortgage Broker/Lender License | $125,000 |
Remember the bond amount is the maximum amount of coverage available to your customers. The cost is going to be a small fraction of this bond amount.
How Much Does a Michigan Mortgage Broker, Lender, and/or Servicer Bond Cost?
The price of a mortgage broker, lender, and/or servicer bond is determined by a rate, quoted from a surety.
A surety is the insurance company that underwrites and backs the bond. Every surety conducts their own internal assessment of an applicant based on factors such as:
- Personal credit of the individual or business owners
- Mortgage and lending experience
- Prior bond claims if the individual or owner has been licensed in the past
Because each surety does their own independent assessment, the quoted rates will be different. So finding a lower rate can easily save you hundreds or dollars when purchasing your bond.
And this is why you should work with a specialized surety agency like Surety Bonds Direct to buy your surety bond.
As an agency, we work with multiple A rated sureties allowing us to price shop for you and find the lowest price.
Once you get your pricing, you're under no obligation to purchase. This is free information you can use to plan. Plus all quotes are good for 30 days.
There's no reason to request your free quote right now or call a bond specialist at 1-800-608-9950.
Individual Mortgage Broker/Originator $10,000 Bond Amount
If you're an individual broker requiring the $10,000 bond, you're in luck.
We have already secured low, fixed prices for the bond amount you require. This means no credit or background check.
Here are the prices and you can pick a longer bond term and save some money.
| Bond Amount | Bond Price | Click to Purchase Today |
|---|---|---|
| $10,000 | $75 | Click to Purchase |
| $10,000 | $131.25 | Click to Purchase |
| $10,000 | $187.75 | Click to Purchase |
Bond Amounts Greater Than $10,000
For all remaining Michigan mortgage surety bonds, including:
- Individual mortgage brokers
- Company brokers, lenders and/or servicers
A custom rate will have to be quoted to determine your price. Let's look at some price examples using the $50,000 bond amount.
Pay attention to the rates and how one percentage point can make huge difference in the price.
| Bond Amount | Surety Bond Rate | Price You Pay |
|---|---|---|
| $50,000 | 0.5% | $120 |
| $50,000 | 1% | $150 |
| $50,000 | 1.5% | $225 |
| $50,000 | 2% | $300 |
| $50,000 | 3% | $450 |
Example pricing is great, but you can get your exact price with no risk or obligation to purchase within one business day.
Go request your price quote today. Remember, this is free information for you. There's no obligation to purchase. Remember, quotes are good for 30 days.
Request a FREE Price Quote Today
Let us price shop for you and find the lowest possible price. This costs you nothing and there's no obligation to buy once you get pricing.
Need Help? Call Us Today
Talk to a bond specialist today. They will help you find the surety bond you need and get you the lowest possible price. 1-800-608-9950
How To File Your Mortgage Broker or Lender Bond?
After you agree to a price, purchasing your bond is as easy as completing an online checkout form.
The entire mortgage licensing process is managed by the National Multi-State Licensing System (NMLS).
Once your payment is processed, our issuance team will immediately begin the process to issue your bond with the National Multi-State Licensing System.
We provide you with detailed instructions to help us file your bond. The process takes only a few minutes.
How Long Does a Michigan Mortgage Broker, Lender, and/or Servicer Bond Last?
The Michigan Department of Insurance and Financial Services requires an active surety bond on file with the NMLS (National Multi-State Licensing System) to legally conduct business in the state.
Every mortgage broker bond has a bond term or 12 months from the effective date. The effective date is the active date you choose when you purchase your bond.
As your bond's expiration date approaches, you need to renew the bond for the following year.
How Do You Renew a Mortgage Broker and Lender Bond?
Renewing a mortgage broker and lender bond is easy. As your bond expiration date approaches, your bond specialist will contact you 30 to 45 days in advance to ensure you don't miss paying the renewal premium.
Your bond specialist will have renewal pricing already quoted, speeding the process up even more.
All mortgage bonds are continuous. This means once you pay your renewal premium, your bond remains active. You don't have to do anything extra.
Mortgage Broker Bonds And Getting Your Michigan Business License/Registration
Nearly every state uses the NMLS to manage the licensing process for mortgage professionals.
You can find a good outline of all the steps on the NMLS website. Just select MI from the list and find the appropriate license type based on whether you're a company or individual.
Here are some of the licensing highlights you should know about.
Select Your Registered Agent
The registered agent is the individual who technically is licensed and covers the mortgage broker employees in the company.
Either an individual or company can be a registered agent, but they must be Michigan residents.
Select Your Qualifying Individual
The qualifying individual is the person who meets the education requirements and other licensing requirements for a company. They are also responsible for the actions of the company.
Financial Reports and Organizational Structure
Financial Reports
Individuals and companies must provide financial statements. Typically this requires providing a credit report for all owners and financial statements for the business.
Business Plan
You must provide a breakdown of the business plan including:
- Marketing strategy and examples
- A full list of products you'll provide
- The target markets you plan on servicing
- The operating structure
Management And Organizational Chart
You'll need to upload an organizational chart showing all of the businesses:
- Divisions
- Manager or the divisions
- Officers in the company
- Owners
- Third party entities or persons who own a piece of the company
- Any subsidiaries and affiliates
Direct Ownership Verification
You must provide an ownership breakdown with copies of stock certificates, operating agreements, and/or any legal paperwork denoting ownership of the business.
It's important that the percentages equal 100%.
Business Relationships
You must provide a list of all business relationships that are applicable to your business. For example:
- Mortgage lenders you will work with
- Mortgage servicers you will work with
Michigan Secretary of State Documents
All business formation documents need to be submitted when getting licensed.
If you're operating under a trade name, you'll need to make sure it's registered with the Secretary of State and submitted during the licensing process.
If you're an out of state business entity, you will need to submit a Certificate of Authority with the Secretary of State. This "registers" your business with Michigan so you can conduct business.
Additional Policies and Paperwork
The following are policies you must submit as you go through the NMLS licensing process.
- Criminal background check
- A list of all mortgage originators sponsored by your business (if applicable)
- Other licenses held by the company or the control person
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