Date Enacted: June 3, 2014
Date Effective:October 1, 2014
The financial world has gone through many changes over the years, and still continues to evolve with the world economy growing and technological innovations taking the front seat. Connecticut’s HB 5353 updates many of the rules surrounding mortgage servicing with this in mind.
In particular, the act affects mortgage servicers applying for licensure. Under the amendment, mortgage servicers applying for a license must obtain both a license bond and a fidelity bond. As a mortgage servicer, learn how to get your Connecticut mortgage license and fidelity bonds as soon as possible.
Who Is Affected by the License and Fidelity Bond Requirements?
Connecticut acknowledges that there are several types of mortgage servicers with varying ways of doing business. Connecticut’s License and Fidelity Bond Requirement Act defines a mortgage servicer as an institution that holds residential mortgages, collects payments (principal and interest) and documents these payments. The revised act goes on to say that a servicer also carries out any administrative duties that may be necessary as well. The act makes clear that organizations which pay borrowers under reverse mortgage or home equity conversions mortgage contracts also satisfy the definition of a mortgage servicer.
There are quite a few institutions that fall under this wide definition of a mortgage servicer, and not every entity may need to obtain a license to continue to perform this service. The revised conditions exempt certain entities that fit the definition of a mortgage servicer.
Mortgage Surety Bond and Fidelity Bond Stipulations
The license amendment may not apply to all servicers, but the mortgage servicer license bond and fidelity bond requirements do.
According to the changes made by the Connecticut Mortgage Servicer License and Fidelity Bond Requirement Act, mortgage servicers who are applying for a license in the state as well as exempt parties must post a mortgage surety bond of $100,000 per location. The bond is conditioned upon faithful performance of all written agreements and responsibilities, honest and accurate accounting of all funds acquired by the mortgager or mortgage while serving in the capacity of mortgage servicer as well as carrying on business in full accordance with the law.
According to HB 5353, servicers and exempt persons must also post a fidelity bond and errors and omissions insurance. The principal amounts for each will be based on the mortgage servicer’s volume of servicing activity. HB 5353 sets the minimum amount at $300,000. The deductible amount of the requisite fidelity bond and errors and omissions insurance should not be more than $100,000 or 5% of the principal amount.
Check out the full Connecticut Mortgage Servicer License and Fidelity Bond Requirement Act for more details.
How do you feel about these mortgage surety bond and fidelity bond changes? Do these amendments better protect the public?