Generally speaking, mortgage broker bonds are classified the same as mortgage banker bonds by most bonding companies. Although they share commonalities there are differences.
If you were to research this further, you would notice at first the operational differences between the two. When it comes to brokers, the broker brings together the bank loaning the funds with the principal involved. He/she is the middleman in the operation of the loan. On the other hand, there is the mortgage banker. The mortgage banker lends the money to the principal. He/she acts as the banker and the broker in the operation of the loan. As we go further in detail on bond types and their differences & similarities, you should have a better understanding now that you have a general understanding about mortgage broker and mortgage banker operations.
Mortgage Bond Amounts: With respect to qualification, banker bonds are more difficult. Some say this is the biggest difference between mortgage banker bonds and broker bonds. Banker bond amounts are much larger, varying between 1.5 and 3 times that of a mortgage bond, depending on state regulations.
Mortgage Bond Forms: A bond form is specifically what the bond guarantees required by the language by the state. Depending on theses state languages, each state has different forms for mortgage broker bonds and banker bonds. With that being said, mortgage broker bonds for one stateâ€™s language may be very similar to another stateâ€™s language for the same bond at any given time. In Georgia, for example, both of their bond forms are lacking common language called an aggregate clause. Due to this bond language, both mortgage banker and broker bonds are turned down by most bonding companies.
Claim Ratios: Since the banker is lending the money, some argue that they are more at risk compared to the broker bondsman. The loss ratios between the two are very similar according to recent studies. Even though their obstacles are different and vary, banker bonds and broker bonds are relatively the same risk factor. Mortgage bankers may have an increased risk but compared to the hurdles that the brokers must overcome, they seem to offset each other. Nonetheless, bonding companies underwrite both bonds in the same fashion because the claim ratios are comparatively similar.
The debate is, should the bonding company underwrite broker bonds the same as banker bonds or as separate classes of business. The differences and similarities of these bonds need to be reviewed to determine an answer. Although some consider banker bonds with higher risk than the brokers, the claim ratios are about the same. The bond forms could be a similar state language for bonds but may have a different form each banker and broker bonds. The bond amounts are significantly higher for mortgage banker bonds compared to mortgage broker bonds. This is why you need the expertise of your agents. Most good agents will make certain which markets are best whether you are applying for an mortgage banker bonds or a mortgage broker bond currently for each class of business. Read more in the article â€œWhat Makes A Good Surety Bond Producer?â€? if you are seriously considering applying for either bond.