Surety Bond News

This is the first of our series, “Mortgage Broker Bonds: State By State”. We decided to start with Pennsylvania, as it is our home state and also one of the most difficult states to get approved for. Below we will discuss the current bond market for this particular bond, the amount required, specifics of the bond guarantee (bond form), additional state requirements, and where you can obtain this difficult to place bond.

Current Market: In general, the current surety bond market is quite conservative. The Pennsylvania mortgage broker bond is in its own league when it comes to difficulties in placing a bond. Our agency knows the surety bond industry almost inside and out, specifically mortgage broker bonds. To our knowledge, we are the only agency nationwide to offer the the Pennsylvania bond with no collateral required. Even more incredible, credit score is not an issue when it comes to approval. As long as the principal does not have a bankruptcy or tax lien in the past 7 years, unpaid collections, or a civil judgment placed against them (ever), they are approved.

Bond Amount: The state requires a $100,000 bond, which is on the high end compared to most other states. The size of the bond also makes it difficult for the typical bond producer to approve the average client. (The bond is only required for brokers that collect funds prior to a loan closing.)

Bond Form: The Pennsylvania mortgage broker bond form scares many bonding companies away from the bond. The bond form is quite different, even from a quick glance. One will quickly notice the bond form is 8 pages rather than the average 1-2. The form does have the standard cancellation and aggregate language required by most sureties, but there are other downfalls. The bond form gives the state a lot of control in the event of a claim, which scares away most bonding companies. Fortunately, we are appointed with a surety that realizes that mortgage broker bonds are somewhat of a lower risk in general, as they are not actually lending the funds.

Additional State Requirements: Mortgage brokers that are going to process first mortgages must pay a licensing fee of $500 and a $200 renewal fee. Second mortgage broker licenses also require a $500 fee and requires a separate application with different requirements. Six hours of continuing education and training are needed each year. The broker must also submit national and Pennsylvania criminal record checks (including fingerprint cards). Similar to many bonding companies the state will also want to see a resume of previous work experience in the field. Proof that the company telephone lines are in the broker’s name is also required. The broker has to keep their main place of business in Pennsylvania.

Special Programs: We offer an exclusive “Instant Approval Online Program” for this particular bond. The application takes less than five minutes to complete and the quote is given to you immediately, online. You can access the program at: Mortgage Broker – Instant Approval Online Program

The Pennsylvania mortgage broker bond is arguably one of the most difficult to place commercial bonds out there. JW Surety Bonds writes more new mortgage broker bonds than any other agency nationwide. This allows us to place our applicant under a bulk program that benefits our clients greatly. Visit the Mortgage Broker Bond Section of the Surety Bond Forums if you have any questions regarding any of our services.

People often mistake surety bonds for just another type of insurance. There are numerous differences separating the two. First, we will go over what they actually guarantee. Next, we will go over how they work. You will have a better idea of what they are after knowing what they do and how they function. The concept of surety bonding was created thousands of years ago, which has remained the same ever since.

Contrasting insurance and surety bonds

Parties Involved: Insurance only involves two parties, the insurance carrier and the principal. Suretyship involves three parties. The principal is the person or entity required to obtain a bond. The obligee is who is requiring the bond of the principal, they are also the beneficiary in the event of a claim. The surety is the bonding company backing the bond. To sum it up, the obligee requires a bond of the principal who obtains it from the surety.

Risk: With insurance, the risk is with the insurance company. In traditional surety underwriting the risk is with principal. In other words, the surety guarantees the principal’s performance to the obligee. However, the surety will look to the principal for payment if a claim arises. Many ask, if the surety has no risk than what is the principal paying for? While it is ideal that the surety has no risk, this is not the case. Companies and their owners could declare bankruptcy or refuse to pay a surety when a claim arises. The surety’s premium can be thought of as a service charge for their financial backing. When you look at the alternative of a letter of credit, suretyship looks like a great deal! With a letter of credit the principal would be required to put up the cash for the full amount of the guarantee and would be required to pay their banks service charges (which are usually comparable surety service charges).

Payment: Payment for bonds are usually paid in annual lump sums. One must be careful when obtaining a bond, as most bonding companies have premiums fully earned for the first years premium. This means that if a principal cancels a bond mid-term the surety will not return premium. A responsible bond agent will always make that clear to the principal when giving them a quote.

How do surety bonds work? The obligee requires that the principal obtain financial backing to guarantee their work. The principal looks to the surety for their guarantee their work. In exchange for the guarantee the surety charges the principal a fee. If the obligee files a claim, the surety will be required to take action on the guarantee they made. The surety will then look to the principal for payment of the claim. If the principal fails to reimburse the bonding company they will certainly see them in court.

The above should give you a good idea of what a surety bond is and how they work. If you are unclear on anything in this article, you can feel free to post a comment or start a dialog in our online forums.

According to several agents and underwriters throughout the country, the majority of bond agencies are hearing their phones ring less and less as we approach Thanksgiving vacation. I can’t quite say the same is true for JW Surety Bonds; we are busy as ever due to our unique surety programs.

I was planning on writing an article on how to obtain the lowest surety rates, but unfortunately I may not have time until after the holidays due to a last minute rush by many of our clients to obtain their bonds prior to stuffing themselves with turkey! More articles are soon to come, but our current clients needs always come first so you’ll have to come back to read more after Thanksgiving.

Manufactured homes are about to make a comeback in a big way. Due to the current housing market many young people can not afford to buy a site-built house. The recent hurricanes will also give the industry a good boost in sales, as people are looking for affordable housing that can be moved into as soon as possible.

Surety bonds are helping to keep the manufactured housing market regulated. The state of South Carolina raised their bond requirement from $15,000 to $30,000. Currently, one in five homes in South Carolina are manufactured housing. David Bennett, an administrator of the Manufactured Housing Board stated, “You just can’t get into this business on a shoestring”, “A little more regulation is good for the customer.”. Trey Ledbetter, a co-owner of Ledbetter Housing Center, a manufactured home dealer said, “Only your real professionals are left,”. The number of dealers in the state has dropped from roughly 800 in the late 1990s to about 125 today.

Without government regulation and a surety bond requirement, fly by night companies would no longer be a rarity, leaving countless families with tremendous financial losses. If a manufactured home company is negligent, the bond claim will help to ensure some compensation to the home buyer. A little regulation goes along way with the current boom in manufactured housing. A booming market is ripe for unqualified entrepreneurs attempting to succeed in industries they know little to nothing about. It is a good thing instruments like surety bonds exist to clean up house on industries in need.

Every day technology is making its way further into our daily lives. Internet sales are increasing globally with every passing year. Many Internet surfers are still wary of making purchases online, especially when they must divulge personal information such as social security numbers.

Often, our agency is asked if our online applications are safe; I can say with 100% certainty, yes! We make use of the industry standard VeriSign, which submits all applications in 128-bit encryption codes. The encryption is the strongest available and has never been broken. In fact, 93% of fortune 500 companies make use of the same technology.

I wish I could say that applying for a surety bond is safe with any agency. Unfortunately, the fact of the matter is, that it is simply not true. I have stumbled upon many bonding agency or insurance agency sites that do not take any security measures. It is not that the surety bond and insurance industries are particularly careless, you will see these trends in a variety of different businesses. I am disappointed that the insurance industry is not more careful with how personal the information they require actually is.

There are precautions any web surfer can take to ensure their own online safety. Web browsers will tell you if a site is making use of encryption with a small padlock icon at the bottom of the browser. If it is open, there is no protection at all. If it is closed they are taking measures to make your online experience more secure. Don’t be fooled though, a closed padlock does not always mean that it is secured by 128-bit encryption, as there are lesser grades of encryption being used online as well.

A social security number, personal financial information, etc. is nothing that you want falling into the wrong hands. Prior to doing any online shopping, do some research; it will save you from tremendous headaches in the future.

You can feel safe applying through JW Bond Consultants, Inc. Our online surety bond applications are always secured using 128-bit encryption.