’Tis the Season

BY CHRIS STURDIVANT

Mortgage brokers & lenders are often required to obtain a surety bond as part of their state licensure process. These surety bonds act as a financial safety net & let the public (regulators & consumers) know that a mortgage broker or lender is financially responsible & capable of fulfilling their obligations.

Surety bond requirements are set by statute, and vary based on a company’s license type, jurisdiction & funding volume. Here’s a comprehensive list of recent changes to surety bond requirements, pricing & processes in several states:

• All new bonds are issued at a rate of $6 per $1,000 in liability for bonds up to $250k (excluding CA CFL bond)

• California Financing Law (CFL bond): This $25k bond is now freely issued by NNA Surety without any credit check or financial review at a flat rate of $250/year.

• Minnesota Mortgage Loan Originator bond: The minimum bond requirement has increased from $100k to $125k. NNA Surety can provide this bond at a premium of $750/year, without any credit check or financial review.

• Individual MLO bonds in MI require an original bond form that is mailed from the surety (not submitted in the NMLS system)

• Kentucky requires both companies and individuals to be bonded ($250k for companies, $15k for individuals)

• Maryland has changed their bond limit requirements based on funded volume ($50k, $100k, $250k)

• Companies with aggregate liability exceeding $1M should be prepared for underwriting (owner’s credit, indemnity agreement, possible financials)

What to know when renewing your existing surety bond(s):

1. Renewal process: Most mortgage companies can renew their bonds simply by paying their annual premium on time. For larger companies with greater than $1M in aggregate liability, the insurance underwriter may ask the company owners for an updated credit report and/or financials.

2. NMLS Filing: Bonds issued in the NMLS system are “continuous” bonds & are valid until cancelled by the underwriting insurance company. There’s no need to refile annually at the time of renewal.

3. Rider requests: If your address changes, or bond liability amount changes due to current funding volumes, the insurance companies will issue a rider in the NMLS system documenting the change. All riders will need to be signed by the principal(s) of the mortgage companies.

The surety bond process has never been easier for mortgage companies. Costs have dropped significantly in the past year. Bonds may be purchased easily online & obtained within minutes; NMLS filings can take a few hours after purchase.

Chris Sturdivant, VP, Bus Dev for NNA Surety Bonds & National Notary Association, is a licensed insurance agent in all 50 states. He works closely with licensing & compliance at the largest banks & non-bank mortgage companies in the country. nnasuretybonds.com