JW Bond Consultants Interviewed for NBER Study

Late last year, Michael Weisbrot, Vice-President of JW Bond Consultants, Inc. was interviewed for a National Bureau Of Economic Research study. The interview was done by phone with researcher Richard M. Todd. Michael lent his expertise in suretyship to explain the current market conditions for mortgage broker license bonds. The paper investigated mortgage regulations and what effect they had on the consumer.

The study was published in December of 2007 and can be found at: Mortgage Broker Regulations That Matter: Analyzing Earnings, Employment, and Outcomes for Consumers

The Surety Bond Claims Process

Surety bond claims are as widely varied as the myriad bond forms, obligations, jurisdictions, parties and fact patterns one can imagine. They can be as simple as a parking ticket or as complex as the college football rankings or this year’s delegate counts

The process ultimately self-adjusts according to the individual case, but this entry should provide some general help and basic orientation. The most important aspects involve communications: immediate, concise, thorough and frequent contact with surety claims personnel; the complete disclosure of information; and continuous, real-time status updates. Surety claims persons are expected and required to treat all parties fairly, ethically, thoroughly and within legally prescribed time frames and in a courteous, professional manner. Give them all the information they request, in addition to what you would like them to have, and do it as soon as possible. Never be afraid to ask questions throughout the process. Like you many, if not most surety claims professionals had never heard of this obscure subject matter until shortly before they got involved with it. So, they are typically tolerant of what you may feel are “stupid” questions.

Search the Internet for situations similar to your own. Talk to your peers to the extent possible. Browse and ask questions here, you may find an answer if you seek only basic information. Oftentimes, the bond obligee, agent, broker or underwriter can help as well, especially with finding the correct claims contact at the surety. If a statutory bond is involved, often the governmental entity requiring the bond can assist.

Learn About Bond Claims

Why You Need To Avoid Claims At All Costs [Video]

Depending on the ramifications of the outcome of the claim, you may need to obtain highly-specialized surety claims experts, e.g., legal, accounting or construction consultants. This may not be the time for old buddy who went to law school, but to get on the search engines. Most find that this is money well spent. Look at it this way: Four Minute Oil Change is not the place for the 90,000 mile tune-up, no matter how well-intentioned. Sometimes, you have to go back to the dealer, who put the thing together. If you are facing a tough situation, you should be aware that others involved may consider it routine. Prepare accordingly.

There is a fair amount of printed matter available on the law of surety claims, but much of it concerns complex construction and is prepared for the benefit of the surety itself. These books tend to be weighty tomes, nationwide in scope, written by and for specialists. But they may also be very helpful orienting the layperson and should not be overlooked. Despite the fact these are law books mostly written by surety attorneys, these
American Bar Association (ABA) publications – scroll down to “Fidelity and Surety Law” may be worth your while.

If your surety claim involves highly technical construction issues, in addition to legal ones, you will have to search accordingly. For example, often construction contract surety claims may involve liquidated damages (LD) due to delays. Books like: Construction Scheduling: Preparation, Liability and Claims by Wickwire et al, Guide to Construction Contract Surety Claims Schwartzkopf et al., are excellent points of reference. Internet searches within bookseller sites of may yield similar titles.

Unfortunately, surety bond claims happen. Typically, they are not painless, nor are they insurmountable. The above resources can give some guidance and a rough template of how to proceed.

Guest Author: Surety Insider, LLC

Nationwide Mortgage Licensing System: Pros & Cons

The Conference of State Bank Supervisors (CSBS) has developed an electronic licensing system in hopes of standardizing and streamlining mortgage licensing. As of 12/20/07 42 mortgage regulatory state agencies have signed up.

The recent mortgage industry boom created a huge influx of new licensees. Many state departments were overwhelmed by the volume. The Nationwide Mortgage Licensing System (NMLS) was the response of the CSBS in order to be able to keep up with the increase of applicants.

Jeff Vogel, CSBS chairman stated, “We were clearly seeing the challenge to our supervisory systems,”. He said, “The world of mortgage finance and residential mortgage lending was changing at the speed of light while state and federal regulation struggled to keep pace. Also, the industry had a weak track record on self-regulation,”. “We recognized that serious reform was needed.”

All of this sounds like a very cost effective and thoughtful way to handle regulation, right? So who could disagree with the implementation of such a system?

The National Association of Mortgage Brokers (NAMB), that’s who. Before you say to yourself, “well of course, they don’t want to be regulated”, you should listen to what they argue. NAMB claims that the NMLS does not effectively protect consumers, as 60% of mortgage originators will not be regulated by the electronic system.

Federal law prevents any regulatory activities related to any federally chartered bank, thrift, or credit union. This means that states cannot license or regulate mortgage activity by these institutions.

Harry Dinham, the President of NAMB cited the largest recent fines and settlements involved lenders and banks, Ameriquest’s $325 million settlement in 2005 and Household Bank and Beneficial Finance’s $484 million settlement in 2003.

Dinham asserted that “If the goal of this registry is to protect consumers by standardizing license requirements and tracking bad behavior then it should apply to all mortgage originators. As it stands today, thousands of loan originators who work at banks and other financial institutions would not be required to register. This approach puts consumers at risk”. He went on to say that “This flawed system will create a false sense of security for consumers and government agencies because many bad actors will continue to be able to move freely from bank to lender and back again without fear of being detected by the proposed registry.”.

So lets take a look at the strong pros and cons for and against the system.

Pros:

  • Increased efficiency and effectiveness on the state level
  • Improved consumer protection
  • Cons:

  • Most lenders are not regulated by the system
  • It appears that the system is much needed and should help to strengthen mortgage regulation on the state level. Since all lenders are not monitored by the system, the mortgage lenders regulated by it are up in arms about some of their fellow lenders not being under the same microscope. However, the system never changed who is regulating them. It is simply helping them to better regulate lenders that are overseen by state agencies. So wouldn’t the best solution be to push for the same system to be used on the Federal level? That would offer greater protection to all and all lenders would then be an equal playing field.