On 06/19/2009, Texas has enacted HB 2774. This eliminates the $25,000 net worth and $50,000 license bond requirement for mortgage brokers. This law requires that the financial requirements for holding a mortgage loan officer or mortgage broker’s license must be met through participation in the mortgage broker recovery fund; under Texas law in section 156.01 of the financial code, this already exists. The new law amends the recovery fund provisions. This change limits payments out of the fund to 25,000 aggregate for all claims arising from the same transaction, and to $50,000 as to all claims against a licensee. From now on this will not allow recovery of attorneys’ fees and court costs. Also, payments from the recovery fund will be reduced by any recovery from the surety or insurer. The banking regulators can use these funds to cover any costs of safely managing old mortgage loan documents and any financial responsibilities of administering the fund.
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Texas Mortgage Broker License Bond
August 4, 2009 by Lisa GrimsleyCategory: Commercial Bonds, Mortgage Broker Bonds, Surety NewsTags: bond requirements, legislation, license & permit bond, license bond, mortgage broker, surety bond, texas, tx | Comments (0)
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Changes For Mortgage Broker Bonds & Mortgage Lender Bonds
February 28, 2009 by Rick BredowNew state legislation is changing the way many brokers and lenders will conduct future business, as there have been numerous changes in 2008-2009 timeframe which will affect mortgage brokers and mortgage lenders.
First, a primary change will be the increased required bond amounts along with tighter regulations that will be imposed on business transactions and pre-licensing certifications. Although some of this new state legislation has passed, it seems like many states are set waiting critical decisions from Congress, which is expected to jump start the weakened economy. Many states are taking a back seat to changing regulations until they see how the new president’s economic stimulus package will affect the mortgage industry, as well as being afraid to move too quickly to adopt new legislation, since remembering the demise of the sub-prime mortgage crisis which left many small mortgage brokers and lenders out of business or severely crippled. In addition, many states are looking to the government for their proposed solution to the housing crisis. The combination issues of the current economy & housing crisis may result in a decrease of licensing for brokers and lender in this upcoming year. New legislation passed that went into effect mid 2008 and are effective for all renewals in 2009 & introduced in the following states: Connecticut, Iowa, and Maryland which have all increased the required bond amounts.
• Connecticut has increased their required bond amount from $40,000 to $80,000 effective August 1st, 2009.
• Iowa increased the required bond amount from $50,000 to $100,000 effective 12/31/08.
• Maryland has made increases in the bond amounts based on the volume of loans. Their $25,000 requirement has increased to $50,000, the $50,000 requirement has increased to $100,000, and their $75,000 requirement has increased to $150,000.
In addition, four (4) other states attempted to pass legislation that would increase the required bond amount and impose tighter requirements for mortgage brokers and lenders in 2008. Those states included Hawaii, Missouri, Oregon, and South Carolina, all which rejected the proposed increases and thereby postponing any decisions at this time. These states have concluded to revisit this legislation in 2009 once the economic situation is further determined for 2009. The state of Alabama had a proposal on the table to enact legislation requiring a bond for mortgage brokers and bankers for the 2009 license period. This legislation did not pass and will be revisited in mid 2009.It is further expected that we will see many changes in 2009 to the legislation and bond requirements that affect mortgage brokers and lenders. The primary focus of the state legislation is expected to reduce the amount of claims and keep business owners working honestly and ethically. Keep in mind, that with the economy in crisis there will be many changes in the future that will affect your license and your bond. To remain best advised of these current changes, keep in contact with your state licensing agency.
Category: Commercial Bonds, Mortgage Banker Bonds, Mortgage Broker Bonds, Surety NewsTags: connecticut, Hawaii, iowa, legislation, maryland, Missouri, mortgage broker, mortgage crisis, Oregon, South Carolina | Comments (1)
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Connecticut Increases Mortgage Bond Requirements
January 30, 2009 by Rick BredowThe Connecticut House Bill 5577 increases the mortgage bond requirements in the State of Connecticut by doubling the amount of existing bonds. This Bill became effective on July 1, 2008. The passing of this Bill is not good news for licensed Mortgage Brokers and Lenders in the State of Connecticut, since this Bill requires that all Mortgage Brokers and Lenders carry a bond for $80,000. All licensed Brokers and Lender must be compliant by August 1, 2009.
What will this mean to the thousands of Mortgage Brokers and Lender in the state of Connecticut? Bottom-line financially, they will be paying more for their Surety Bonds to be compliant with the state guidelines. The Surety Companies will be looking a bit closer at applications and increases for bonds in Connecticut due to the now large requirement of $80,000. Surety underwriters will be looking a bit closer at Net Worth of the business and the owners of the company. They will want to make sure there will be enough cash in reserves to handle any claims that could arise. Due to the increased bond requirements, the affect on Mortgage Brokers and Lenders that may have issues with personal credit will result in difficulty securing lower rates for these bonds. The bill allows for in increase in personal net worth from $25,000 to $50,000. There will be a few markets that will be positioned to write these
bonds, but overall it can be expected that they will be looking for larger premiums, due to the increased financial risks. In addition, this bill will combine existing “First� and “Second� mortgage expert licenses into one combined license that will cover all activities and require that all applicants are using the Nationwide Mortgage Licensing System (NMLS). The state will also require that the license have an expiration date of December 31st of the following year.
To summarize further changes in the Bill, the State of Connecticut requires each licensee to contact the state license center, if any of the following occur:
• Licensee experiences a bankruptcy
• Criminal Indictment of any type
• Provide notice of license denial, cease and desist, license suspension, and or fines from any other licensing entity
• Notification by any agency of the Attorney General
• Any revocation of a warehouse line of credit
• Notification of any license holders owning over 10% of the company filing bankruptcy
• Notification of ownership changesNeglecting to report any of the occurrences above could result in suspension or revocation of a license.
With all these changes in the State of Connecticut, we can expect the Surety Companies to tighten their guidelines and underwriting practices and these bonds will not be as easy to get as they have been in the past. For specific rules and regulations, it is strongly recommended visiting the Connecticut State Website for more specific licensing requirements.
Category: Commercial Bonds, Mortgage Banker Bonds, Mortgage Broker Bonds, Surety NewsTags: bond reuirements, connecticut, legislation, mortgage broker | Comments (0)
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Alaska – A New Frontier in Mortgage Licensing and Suretyship
November 20, 2008 by Rick BredowAfter years of debate, the State of Alaska has joined the ranks of most other states with legislation to regulate the Mortgage Broker and Mortgage Lender Industry. The Alaskan act is entitled the Alaska Mortgage Lending Regulation Act. This act has structured guidelines for licensing and registration of all lenders and brokers within the state. This underlying basis of this act will cause accountability of the brokers & lenders for their actions.
As a result, there will be many new licensing guidelines and requirements that will regulate the Mortgage Industry in Alaska. All new applicants applying for the license after July, 1 2008 must adhere to new the new requirements, while any Mortgage Brokers or Mortgage Lenders that are currently operating in the state must be compliant with the new licensing laws no later than March 1, 2009. After March 2009, one may not operate in the state as a Mortgage Broker, Lender, or Originator unless licensed.Some of the new requirements that will be put in place are as followed:
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• Full application
• Competency testing
• Continuing education requirements
• Annual reporting to centralized agency
• Record keeping as per guidelines forthcoming
• $25,000 Mortgage Broker License Surety BondThe new laws will affect all Mortgage Broker or Mortgage Lender & in all capacities. These new regulations will also regulate brokers or lenders that are running their business via the internet or by providing services from a remote location either within the state or outside of the state, via some sort of mail service, or by phone.
Initially, the applicants will be required to submit to a full Background Investigation and the application must pass this phase. This investigation will be done through the submission of fingerprints to the Department of Public Safety in Alaska. Next, the applicants will need to take a Competency Test. This test must be passed with the desired score, prior to being allowed to service any residents of Alaska. The test is free the first time for applicants. If the test is not passed the first time, the retesting will be made available for a fee.
The Surety Bond that will be required for Alaska will need to be in the amount of $25,000. The bond must be in the favor of the state of Alaska. The bond insures that Mortgage broker and/or Lender will operate their business ethically and under the new guidelines set forth under the Alaska Mortgage Lending Regulation Act. These mortgage bonds must be established as a bond of a continuous nature with effective for the duration of a valid license.
For more details about the new requirements, it is recommended that you visit the Alaska State website or the Alaska Department of Commerce, Community, and Economic Development Division of Banking and Securities.
You can find all state requirements in our mortgage broker guide on “How To Become A Mortgage Broker“.
Category: Commercial Bonds, Mortgage Banker Bonds, Mortgage Broker Bonds, Surety NewsTags: alaska, licensing, mortgage bond, mortgage broker, mortgage lender, state requirements | Comments (0)
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What is A Mortgage Broker?
November 7, 2008 by Rick BredowA Mortgage Broker is defined by Wikipedia as “a person or company that acts as an intermediary who sells mortgage loans on behalf of individuals or businesses�.
Years ago, banks and other lenders had sold mortgages on their own thus controlling the now competitive market. Today, the mortgage business has evolved into a very competitive market and the role of a Broker has gained popularity. The role of a Broker has also surpassed the role of banks and other lenders to become the largest sellers of mortgages. These roles are regulated by each individual state and the Broker must be licensed to sell in their state.
There are numerous tasks of the Mortgage Broker and the proper management of these responsibilities typically put themselves and their company’s reputation on the line both financially and ethically. They handle all of the marketing and share a large part in the advertising that will attract a client to their firm. They also handle some of the more tedious work like background and credit history of a perspective client. This is a function that saves the actual mortgage company valuable time and effort. This would include income verifications of the client to make sure they even qualify for the programs available. By handling these verifications & history checks, the Broker can assess exactly what program will fit the needs of his client. The Broker also assists the client in the pre-approval process which will allow their client to shop for a home at their leisure with a more competitive edge.
When it comes time for the mortgage to be signed, the Broker does the legwork of gathering paystubs, insurance documentation, and bank statements that will prove to the mortgage company they can handle repayment of the loan. They will also handle the lender application forms which insure that they are completed correctly and in their entirety. The most beneficial function that the Broker handles at the signing of the mortgage is the explaining of the legal documents the client is signing and making sure they are signed and completed correctly.
According to a study conducted in 2004 by the Wholesale Access Mortgage Research & Consulting, Inc., there are approximately 53,000 Broker companies which employ approximately 418,000 employees which account for 68% of the residential loans in the United States. It is estimated that number increased to roughly 80% in the year 2007. At this point with the economy in a struggle, the smaller Brokers are struggling to survive.
Today, Mortgage Brokers that have survived are more competitive due mainly to their access to pricing discounts and capital markets. The Broker typically has much lower overhead costs compared to the large banks and lending institutions. They also have the advantage of lowering rates instantly to compete for their clients. This is allowing them to control 60% to 70% of the market. So, the next time you are looking for a mortgage check out your local Mortgage Broker and compare the rates and services — you may be surprised.
Category: OtherTags: mortgage broker | Comments (0)
