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.

New 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.

The 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 changes

Neglecting 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.