Pennsylvania Mortgage Broker Bond

PennsylvaniaHB 1654 is a new law that was introduced in the state of Pennsylvania concerning mortgage brokers. The new law requires mortgage lenders, mortgage loan correspondents and mortgage brokers to attain a surety bond in a quantity calculated by the total mortgage loans originated throughout the calendar year that is secured by Pennsylvania residential real estate. Mortgage loan originators are required to attain a surety bond or be covered by the surety bond of their employer. The surety bonds must be from a state licensed surety able to operate business in the Commonwealth.

The new law requires mortgage lenders and mortgage correspondent lenders who hire mortgage originators to acquire a surety bond in the these quantities: $100,000 if the mortgage loans originated are less than $30 million; $200,000 for licensees with loan originations spanning from $30 million to $99,999,999.99; $300,000 for licensees with loan originations spanning from $100 million to $249,999,999.99; and should the licensee have loan originations accumulating to $250 million or greater, then the surety bond must be in the quantity of $500,000.

The present law requires mortgage brokers to acquire a $100,000 surety bond but not if they confirm that they do not permit advance fees, in which case the brokers are excused from the bond stipulation. HB 1654 states that mortgage brokers that employ mortgage originators must attain a surety bond in a quantity calculated by the loans originated. The surety bond amounts would be like so: $50,000 if the sum loan originations are less than $15 million; $75,000 for loan originations spanning from $15 million to $29,999,999.99; $100,000 for loan originations spanning from $30 million to $49,999,999.99; and $150,000 for licensees with mortgage loan originations accumulating more than $50 million in the calendar year.

Similar to other state laws, Pennsylvania excuses organizations and instrumentalities of the federal and state government from its laws concerning the licensure and supervision of banks. HB 1654 qualifies the exclusion from state licensure. Any organization or instrumentality of the federal government or a corporation formed by Congress, such as the Federal National Mortgage Association, the Government National Mortgage Association, the Veterans’ Administration, the Federal Home Loan Mortgage Corporation and the Federal Housing Administration must acquire and sustain equal surety bonds as a state licensed mortgage lender. Should these entities not acquire the surety bond, they are subject to licensures and regulation as banks in the State of Pennsylvania. Identical qualification is added for agencies and instrumentalities of state or local government, the District of Columbia or any grounds of the United States. These entities are excluded from licensure and supervision in Pennsylvania but only if they attain the surety bond required of mortgage lenders.

Mortgage loan originators are normally covered by the surety bond of their state-licensed mortgage lender, correspondent lender or mortgage broker. Should a mortgage originator be employed by a state/federal agency or instrumentality that chooses to be licensed in Pennsylvania instead of attaining the surety bond, then the mortgage loan originator would be obliged to acquire a surety bond in order to be licensed. The surety bond would have to be in these quantities: $25,000 for total loan originations less than $7.5 million; $50,000 for loan originations spanning from $7.5 million to $14,999,999.99; $100,000 for loan originations spanning from $15 million to $29,999,999.99; $200,000 for loan originations spanning from $30 million to $49,999,999.99; and $300,000 if the sum loan originations are $50 million or greater. HB 1654 became active upon enactment.