Surety Bond News

Mortgage brokers and lenders must recognize a new act in the District of Columbia. The new act which is named B 1020 is the Mortgage Lender and Broker Emergency Amendment Act of 2008. The new law requires a net worth requirement on mortgage brokers while inducing the license bond requirement under present law. B 1020 also authorizes the broker to pay into a recovery fund as the Commissioner of the Department of Insurance, Securities and Banking imposes in lieu of meeting the net worth and bonding requirements. The current law bases the bond amount on the loan volume of the broker with a minimum amount of $12,500 and a maximum amount of $50,000. The law was introduced behind schedule in the session and was enacted after 11 hours. The bill adds a new federal law enacted under H.R. 3221 (2008), which asks the Secretary of Housing and Urban Development to institute licensing and bonding requirement standards for all mortgage loan originators and brokers. While under the federal structure, all state licensing laws must contain a surety bond or a minimum net worth requirement. The federal law requires the surety bond amounts or the net worth levels to be based on the volume of loans. H.R. 3221 also permits the utilization of recovery funds in place of bonding or a minimum net worth. All states have 24 months to apply the federal standards, or the secretary’s federal program will apply. The District of Columbia has chosen to ask for both a surety bond and a net worth standard, and also authorizes for a recovery fund payment. B 1020 also revoked the present requirements for the bond amount. The Commissioner of the Department of Insurance, Securities, and Banking will establish all requirements for the surety bond under the new law.

In Kentucky a new law was introduced regarding new requirements for mortgage lenders and brokers. HB 552 changes the license surety bond requirements for mortgage lenders and mortgage brokers. Under existing law, lenders are asked to obtain a surety bond of $250,000 while brokers are required to post a $50,000 bond. The surety bond amounts remain unaffected, but HB 552 allows the Executive Director of the Office of Financial Institutions to recoup expenses, fines, and fees that they have levied from the surety bond. Additionally, the new law permits the Executive Director to make recovery for borrowers and clients undergoing losses or damages as a result of the licensee’s disobedience of the law. Existing law already allows direct actions on the bond from consumers. HB 552 became active upon enactment under emergency announcements linked to the present condition of the mortgage industry.