Why do mortgage bankers, brokers and lenders need a surety bond?
Over 45 states require Mortgage Bankers, Brokers and Lenders to be licensed. Most of these states additionally require that the licensee provide the state with a financial guarantee that they will act in accordance with the regulations of the state. That guarantee may take the form of an irrevocable letter of credit, but most commonly a licensee will elect to meet the requirement by providing the state with a surety bond naming the state’s regulatory department as beneficiary.
Obtaining a surety bond is generally the preferable method for meeting the state’s requirement for a financial guarantee of your performance. The surety company requires that those they bond have the financial resources to meet any the obligations that the bond guarantees, but it allows the licensee to have the unencumbered use of those resources as they engage in their business.
What does the mortgage license bond do?
The purpose of the bond is to assure the recovery of expenses, fines or fees levied by the state regulators for non-compliance with the state regulations. The bond would also assure recovery of losses incurred by borrowers or customers, which result from a licensee’s non-compliance with those regulations.
However a bond is not like an insurance policy. It does not step in and pay losses for you. What the bond does is to guarantee that you will be able to pay any losses up to the face amount of the bond. The bond will only pay in your stead in the event that you are financially unable to meet your obligations.
How do I determine if I need a mortgage license bond, and the size bond my state requires?
Generally the states provide licensees with their requirements when they grant a license. However, the regulations often change and, as the licensee, you have the obligation to be aware of the current requirements. To find the requirements in your state go to State Bond Requirements.
Now that I understand my state’s bond requirements for mortgage bankers, brokers and lenders, how do I get a surety bond?
MortgageBondNet enables U.S. mortgage bankers, mortgage brokers and mortgage lenders to safely and easily satisfy their state bond requirements. Using the simple application located on this website, you can receive the bond you need quickly, and affordably. Complete your application now.
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