Mortgage Broker Bonds: Delaware

The Delaware mortgage broker bond is an easily obtainable bond. Most applicants should qualify for this small license bond, as the language is agreeable to the bonding companies. State regulations are present, but do not seem to infringe on the flow of business. Almost anyone can easily obtain the Delaware bond.

Current Market: The current surety bond market is considered conservative. However, the Delaware mortgage broker bond is considered a low risk bond by many bonding companies. An applicant should have an easy time finding an agent that can place this bond. Some bonding companies are hungrier for mortgage broker bonds than others. Thus, they write them at extremely low rates. Applicants that have difficulties obtaining the Delaware bond, will run into the same obstacles in other states, as there is nothing unordinary about the bond.

Bond Amount: A $25,000 bond amount is rather small in comparison to some of the larger state requirements. While Delaware is not the smallest bond requirement, it probably should be increased. The bond is in place to protect the public from fraud. The sharp rise in the housing market has made for larger loans, which brings larger claims sizes with it.

Bond Form: The Delaware bond form has language that has become a standard for the surety industry. The bond form has an aggregate clause, which makes it so the total amount of claims can not exceed $25,000. The bond also contains language that allows the surety to cancel the bond within 30 days of receipt of a written notice to the state and the principal.

Additional State Requirements: Mortgage broker licenses are processed by Delaware’s Office of the State Bank Commissioner. Mortgage brokers are not required to have an office within the state of Delaware. The broker must designate an individual state resident or another business authorized to transact business within the state to be a registered agent. To apply, a broker business must pay a license fee of $250 for each location and a $250 non-refundable investigation fee. The broker must also submit three business reference letters. Mortgage Broker Licenses are renewed annually; There is an annual assessment fee of $500 for loans maintained inside the state and $1,000 if the loan files are outside of the state.

Special Programs: We offer an exclusive “Instant Approval Online Programâ€? for this particular bond. The application takes less than five minutes to complete and the quote is given to you immediately, online. You can access the program at: Mortgage Broker – Instant Approval Online Program.

The surety bond market is hungry for this class of business. If an applicant has trouble obtaining the Delaware mortgage broker bond, it is a reflection on the risk they present. Programs are available for extreme, high risk applicants. As a last resort, applicants can apply using the Bad Credit Bond Program. There is still the option of posting a letter of credit rather than a bond if an applicant fails to obtain an approval for the high risk program. This is a good alternative to a bond with 100% collateral, but should only be done if the applicant does not qualify for a bond.

Contractor License Bonds, Not To Be Confused With Contract Bonds

Many contractors are new start up companies with owners that know little about surety bonds. Often, a contractor states they “need to be bonded”. Many that make the assertion do not know what it means to be “bonded”. Below, we will review what a surety bond is and the most common bond types required of contractors.

The first thing that a contractor must understand is that a bond is three-party agreement. Therefore, a bonding company will only write a bond when it is required by another party. In other words, a contractor can not obtain a bond just to claim he/she is “bonded”. Often, people make the mistake that anyone can be bonded for any reason. This of course is not true, as surety bonds require three parties and not everyone qualifies. Surety bonds are a form of credit, not insurance. Therefore, the underwriting used in surety bonding is often similar to underwriting for issuing other forms of credit such as a loan.

Contractors usually require either a contractor license bond (a specific bond type) or a contract bond (a general bond category). Both bond types guarantee precisely what their name suggests. A contractor license bond guarantees the contractor will operate per the rules and regulations of the state and is to be filed with their license. This type of bond can be required by the local or state government. A contract bond guarantees a specific contract. Contract bonds are a category of different bond types. Some examples of contract bonds are bid bonds, which guarantee a contractor will provide a performance bond if awarded the job. Performance bonds are a type of contract bond that guarantee the performance of the contractor on the job cited in the contract. There are many other types of contract bonds, but bid and performance are the most common.

At times, a contractor will be required to obtain a letter of bonding capacity from their bond producer/agent. Bonding capacity refers to a contract bond line, which consists of a single and aggregate limit the contractor is held to. For example, a contract may have a $200,000 single and $400,000 aggregate bond line. In this case, the contractor is only approved for jobs under $200,000 and may not have more than $400,000 of bonded work at any given time. Bond limits make it vital for the contractor to have a good line of communication with their bond agent/producer. This will allow the contractor to make the best use of his/her surety credit at all times.

Regardless of the surety bond type, it does not protect the contractor. In fact, in the event of a claim the surety will look to the contractor for payment of the claim and any attorney fees associated with it. A bond is form of credit and should not be viewed as property and casualty insurance. The bond is required in order to protect the obligee (usually the government), or in other words, the party requiring the bond.

With thousands of bond types available, stating “I need to be bonded” is very vague. If you need to obtain a bond, you will need to inform the bond producer what type of business you operate and who is requiring the bond of you. The answers to these two questions should be enough for your bond producer to know what type of bond you are in need of.

Mortgage Banker Bonds: An Increased Risk?

Bonding companies underwrite classes of business different from one another. They classify bond types differently as well. For instance, some bonding companies underwrite mortgage broker bonds and mortgage banker bonds as the same type of bond. Other bonding companies underwrite mortgage banker bonds with more caution, as the banker is directly lending funds.

Most states require a larger bond amount for mortgage bankers than they do for mortgage brokers. The state governments recognize that there is a higher amount of financial risk. An increased bond amount is a good way to help protect the public from fraud. Bonding companies that classify mortgage bankers and brokers as the same type of bond believe that the additional bond amount is the only additional risk incurred. For example, they would treat a $100,000 mortgage banker bond requirement the same as the New Jersey $100,000 mortgage broker (provided both bond forms are acceptable to the surety). Other bonding companies put mortgage banker bonds in a class of their own, with separate rate filings and more conservative requirements of the principal.

Does a mortgage banker bond come with a higher risk of a claim? The short answer is yes. However, the historical loss ratios of many bonding companies show otherwise. Mortgage brokers have little risk associated with the operations of their business. They are the middle man and are making a commission on a loan, not lending the money out of their own pocket. A mortgage banker is lending their assets to finance the loan. In fact, the bulk of the assets on many mortgage bankers balance sheets is comprised of receivables from loans. One would think that a lender would incur more risk and thus trigger more claims. For whatever reason, that is typically not the case.

There are numerous reasons why the claim ratio of mortgage lenders and mortgage brokers are similar. For one, it is more difficult to start a mortgage lending company, as a greater amount of assets are required. Many states also have stricter requirements for mortgage bankers with more invasive background checks. The ease of starting a mortgage broker business over a banker business creates a higher risk of fraud and the claims associated with them. As stated, there is no single reason. However, I feel the ease of start up levels the playing field when it comes to claims associated with the two business types.

At the end of the day, there is no right or wrong answer. Bonding companies underwrite each class of business using requirements which they decide on. The rates are also their decision and are based on what they believe is the perceived risk with each class of business. One could argue that mortgage brokers and mortgage bankers have similar loss ratios and therefore the same amount of risk is involved. One could also argue that bonding companies have grown too hungry when it comes to writing mortgage broker bonds and should rethink how they look at this low risk bond class. Either way, mortgage bankers are just going to have to accept the free market and the decisions of the sureties participating in it.

Mortgage Broker Bonds: Connecticut

The Connecticut mortgage broker bond is an all around easy bond to obtain. The amount and the bond language should be agreeable with almost all bonding companies. If an applicant can not obtain a low rate on the Connecticut bond, it is due to their own credentials and flaws.

Current Market: The Connecticut mortgage broker bond is easily obtainable. Bonding companies write the bond for those who qualify at standard rates.

Bond Amount: The $40,000 bond requirement is not large enough to scare bonding companies. Most underwriters have the authority to approve bonds this size with minimal information, including: credit reports, personal financials, and business financials or resumes.

Bond Form: The Connecticut bond form has aggregate and cancellation clauses required by most bonding companies. The bond form should not be a problem in obtaining an approval at a good rate. If a high rate is given, it is a reflection on the applicant rather than the risk of the bond.

Additional State Requirements:

The Consumer Credit Division of the Department of Banking processes mortgage broker companies in Connecticut. The state requires separate licenses for first mortgages and second mortgages. Mortgage lenders are also permitted to act as brokers as well. Applicants pay a $400 fee, financial statements, and a resume of their past experience in the industry. Applicants must pay an additional $400 for a second mortgage license. They also must provide financial statement, resumes of managing members. Loan originators must pay a $100 registration fee and may operate under the mortgage licensees first and second mortgage licenses.

Special Programs: We offer an exclusive “Instant Approval Online Program”? for this particular bond. The application takes less than five minutes to complete and the quote is given to you immediately, online. The program is unique, as it is soley based on credit and does not require personal or business financial statements. You can access the program at: Mortgage Broker – Instant Approval Online Program.

The Connecticut bond can be obtained almost anywhere rather easily. However our exclusive online program is the only program that offers immediate approvals using limited information.

Avoid Bond Collateral If Possible

Collateral is often required by bonding companies when they feel a submission is not up to par. In certain circumstances, collateral is a good solution to otherwise unwritable risks. However, agents often fail to offer viable alternatives. Many agents neglect to inform their clients as to what they are actually getting into when it comes to their surety bonds the collateral retained. In this article, we will review: downfalls of posting collateral, why collateral is not always the best solution, and good alternatives.

There are many downfalls to providing collateral: tying up capital that could be used more effectively, cost of an ILOC, etc. Surety bond collateral agreements are often overlooked by the principal, leaving them in the dark on important information. The most commonly overlooked requirement is that bonding companies will hold on to the collateral until the surety has no liability on the bond. One might think that liability would end with the expiration of the bond, but this common belief if simply not true. In order for the surety to be free of liability they will require the obligee to state so in writing. In general, government workers will be hesitant to write such a letter and and with good reason too. At times, claims will take time to show up. Government red tape make claims slow to rise, therefore the expiration of the bond is not the end of liability. Some bond forms even have a “tail” on the end. A bond “tail” allows for claims to be filed X amount of year after the bond has expired. If there is a tail on the bond, the principal should not expect to see the collateral until after the tail period has ended.

Collateral is necessary in some scenarios. However, collateral is not the best decision in all situations. In general, a principal is required to post collateral if either they are considered a high risk or if the actual guarantee of the bond is a high risk. Most bonding companies will require 100% collateral in order to write these non-traditional bond risks. Below you will find several alternatives to posting the full amount of the bond:

  • There are some programs for commercial bonds that only require 10% collateral. These programs write almost any bond, regardless of bond language, even for clients with bad credit.
  • Higher risk contract bonds can be written by some bonding companies. However, these outside of the box thinking bonding companies are far and few in between. Some only appoint a small handful of agents nationwide. It is important that your bond agent has access to unique markets if they are available for the particular risk.
  • An irrevocable letter of credit (ILOC) is a good alternative to anyone that has exhausted other methods. When it comes to obtaining a bond with 100% collateral, most bonding companies will want collateral in the form of an ILOC. This means that principal will pay a fee for their bond, a fee for their ILOC, and have capital tied up. If a principal posts an ILOC rather than a surety bond they will not have the cost of the bond. The downfall of an ILOC is that not all obligees will accept them in place of a bond.

Collateral can help guarantee an otherwise unbondable situation. Due to the downfalls, 100% collateral should only be posted when all other options have been exhausted. Keep in mind, a surety bond does not take liability off of the principal. It simply makes use of the bonding companies financial strength to make the guarantee. The principal is responsible for claim payment, whether a bond is obtained or collateral is posted directly with the state. The bond is advantageous if no collateral is required, as it frees up capital and costs about the same as a letter of credit. If you are stuck in a situation where only a bond with 100% collateral suffice, make sure you read all agreements carefully to get a good idea of what you are actually getting into.

Telemarketing Surety Bonds: High Rates For A Reason

Telemarketing surety bonds (also known as a telephone solicitor bond) have higher premium rates than most other license bonds, and there is a reason for it. Legislatures felt that telemarketers invaded Americans personal lives for too long. Most states have legislation with numerous restrictions on telemarketers, with stiff fines when procedure is not properly followed. The Federal “Do Not Call” program also made a difficult situation for telephone solicitors, forbidding them to call a good portion of their clients. The flood of new laws against telemarketers put many businesses in a desperate situation.

The laws restricting telemarketer businesses are plentiful. Below we will review many common restrictions and how they could result in a bond claim. I worked as a telephone solicitor for years to make ends meet in college. Therefore, I believe I have intimate knowledge of both sides of the story.

The solicitor is to identify them-self by their first and last name and the name of the business on whose behalf he or she is calling. This requirement is rather simple and self explanatory. However, trainees are often nervous when they start and will often forget procedures even as simple as stating their name and company name. This wouldn’t be a concern to bonding companies so much if turn around of employees was not so rapid within the telephone solicitor industry.

The solicitor is required to have a written contract that is identical to the description of the goods or services offered in the telephone solicitation, contains the name, address, telephone number and license number of the seller, and states the buyers right to cancel immediately preceding the signature. Telemarketers are often rewarded financially if they make a certain amount of sales. Often greed comes into play and a solicitor may not be completely honest with what the client will be getting.

Can not intimidate, harass, threaten or use profane language during a telemarketing call. I have never seen heard anyone act inappropriately while on the line with a client. However, the fast employee turnovers could result in an increased chance of harassment occurring.

Calls are restricted to after 8 a.m. and before 9 p.m. I felt the company I worked for had their management run exceptionally well. However, from time to time a calling list using a different time zone would be mistakenly used and people would get calls before or after the allotted time period. This was usually due to human error and was correctly rather quickly, but it still happened from time to time.

Calls can not be made to anyone who stated that they do not wish to receive calls from that specific company. I personally never made a call to anyone who claimed they requested to be taken off of the company list. However, I have personally received calls after being signed up on the Federal “Do Not Call” list. Therefore, there still are companies out there that are making the mistake of calling prohibited numbers.

Each local exchange telephone company is required to inform its customers of their rights with respect to telemarketers and automatic dialing-announcing devices. This was covered very well in training at the company I was employed at. They also employed random quality control listeners to ensure that the solicitors were properly stating their requirements. However, calls were not monitored often and when mistakes were found the solicitor usually only received a verbal slap on the wrist.

It is unlawful for a telemarketer to give false or misleading information. While I can proudly say I never mislead anyone, I can’t say the same for my co-workers at the time. However, the wording of this requirement is vague and is left in the eye of the beholder.

All telemarketers are required to keep, for at least 24 months from the date a record is produced, records of all financial transactions, written notices, disclosures, and acknowledgments, including records of calls resulting in a promise by the customer to pay or otherwise exchange consideration for goods and services, the name and last known address of each prize recipient and the prize awarded having a value of $25 or more, and the name and other identifying information of all current and former employees directly involved in telephone sales. I do not have great insight on the management side of telephone solicitation, therefore I can’t say much on this requirement. However, most companies make use of new technologies that do all of the record keeping dirty work for them. I do not see this requirement being a problem, provided the company has the proper equipment to keep track of their records.

I do not want to give the wrong impression in stating that all telemarketing companies operate in the same fashion as my previous employer. Some may be better others may be worse. The above is simply an example using my personal experiences with one telemarketing company.

The general public is not in favor of receiving telephone solicitations. Therefore, telemarketers are an easy target for the legislatures to impose new rules and regulations on. The telemarketing industry will see higher premium rates for some time to come due to the numerous regulations and stiff fines associated with them.