Surety Bond News

Nevada enacted a new bill concerning mortgage loan originators. The new law is named AB 523 and requires that mortgage loan originators be licensed. The Banking Commissioner is required to implement policy that requires mortgage originators to attain a surety bond, satisfy net worth requirements or pay into a recovery fund. Initially, mortgage originators would have been obliged to acquire a surety bond in a quantity which is established by regulation and satisfy the net worth requirements set for mortgage brokers. AB 523 also formed a recovery fund. All these concluding provisions were erased.

North Carolina introduced a new law affecting mortgage loan originators. The new law is named HB 1523 and requires each mortgage loan originator to be covered by a surety bond through employment with a licensed mortgage lender, broker or servicer. The bare minimum surety bond amount for mortgage brokers is $75,000. Should the quantity of loans originated be over $10 million, but less than $50 million, the surety bond quantity must be $125,000. Total loans originated in excess of $50 million in North Carolina in a 12-month time period require a surety bond that is no less than $250,000.
The minimum surety bond quantity required of mortgage lenders is $150,000. Should the quantity of loans originated be in excess of $10 million, but no more than $50 million, the surety bond amount must be $250,000; total loans originated in excess of $50 million in North Carolina requires a surety bond in a minimum amount of $500,000. HB 1523 states that the lender, broker or servicer’s surety bond must guarantee all the originators that the licensee hired and the bond amount will be calculated by the quantity of loans that the mortgage lender or broker originated in North Carolina in a years time. The previous law required mortgage lenders and brokers to acquire a surety bond in the amount of $25,000.

The SFAA modified the AIA in this legislation and were able to influence the bill sponsor to divide broker bond amounts from lender/servicer bond amounts. The surety bond amounts for brokers were sliced in half before the bill was accepted at the House. The surety bond quantities for lenders and servicers were not altered. The SFAA continued to cooperate with the AIA in the Senate to get the bond amounts decreased. The Senate felt that the bond amounts had already been dealt with. No other opposition was felt from any other concerned party on the surety bond amounts.

Another amendment was added to address persons (natural persons) who presently are licensed as a mortgage originator and would be covered by their employer’s surety bond. If such a “natural person” now requests a mortgage broker’s license and they are not an employee of a mortgage broker/lender, they may be licensed as an “exclusive mortgage broker.” Such individuals can proceed as an agent for only a single lender or broker. They only have the option of selling fixed term mortgages with considerably equivalent monthly payments; they either have to satisfy the new bond quantity required of mortgage brokers or they have to be covered by a surety bond provided by the lender/ broker for whom they are an exclusive mortgage broker. The surety bond amount must be $5 million or an amount equivalent to the sum of the surety bond amounts of all the exclusive mortgage brokers that the lender or broker supervises, whichever is less.

A new bill titled SB 342 was introduced in New Mexico concerning mortgage brokers. The new bill requires mortgage lenders and mortgage originators to be bonded and to apply the S.A.F.E. Mortgage Licensing Act. The original surety bond required of mortgage originators is $50,000. Upon renewal, the bill provides for a surety bond amount calculated by the quantity of loans originated in New Mexico on a yearly basis. The surety bond quantities would be $50,000 (under $3 million in loans), $100,000 ($3-$10 million in loans) and $150,000 (over $10 million in loans). Should the loan originator be an employee or exclusive agent of a mortgage loan business, the surety bond of the employer can be used to fulfill the surety bond requirement. The mortgage loan companies’ initial surety bond amount is $50,000 and the penal sum of the bond adjusts to mirror the sum dollar amount of loans originated yearly with the same method and quantity as the mortgage broker bond. The present law authorizes direct actions on the surety bond for individuals who have been injured and restricts the aggregate liability of the surety to all people, cumulative or otherwise, to the quantity specified in the bond. The bill was amended in the 11th hour to contain a private right of action in which persons can take legal action against mortgage loan originators for intrusion of the new law and an enforcement procedure that the Attorney General can commence against the originator for violations that have taken place or that are about to transpire.

The state of New York presented a new law regarding mortgage loan originators. The new law is named AB 6924 and requires mortgage loan originators to be covered by a surety bond. Should the originator be a member of staff or exclusive agent of an originating entity subject to present surety bond requirements, then the employer’s surety bond is acceptable to satisfy the requirement; as long as that the surety bond guarantees all mortgage originators not covered under a qualifying bond. Under present legislation, mortgage brokers must acquire a surety bond in a quantity spanning from $10,000 to $100,000 calculated by loan application volume. All mortgage lenders must attain a surety bond in a quantity ranging from $50,000 to $500,000, which is calculated by the volume of New York closed loans. Under AB 6924, the Superintendent of Banks is allowed to promulgate regulations pertaining to the requirements for the originator’s surety bond. AB 6924 also states that the surety bond amount would have to mirror the dollar amount of loans originated by the mortgage loan originator.

AB 486 is a new law that was introduced in Nevada concerning mortgage brokers. The new law implements a new license bond requirement for mortgage brokers within the state. AB 486 requires a $50,000 surety bond for the principal office and $25,000 bond per branch office. The surety bond quantity is capped at $75,000. The surety bond must be from a corporate surety that the Commissioner of Mortgage Lending finds satisfactory. The surety bond is conditioned on cooperation with the new law and on the imbursement for losses ensuing from a violation. A surety bond form is enclosed in the new law. Surety companies have the ability to terminate the bond with 60 days notification to the Commissioner of Mortgage Lending. AB 486 also authorizes direct actions on the surety bond. As a substitute to the surety bond, the law authorizes mortgage brokers to make a deposit in a bank or trust company allowed to do business in the State in a quantity equivalent to the surety bond required. The deposits can be in the form of the obligations of a state financial institution, obligations of the United States, or obligations of state and local governments and administrations.