Mortgage Broker Bond Guide
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Why do you need a mortgage broker bond?
You need a bond to protect your clients. If you break the rules of your bond, your clients can make claims against it which you’re responsible to pay. For example, if you approve a client for a loan you know they cannot repay, a claim can be filed.
Costs are a percentage of the bond amount that’s required of you, which is based on your personal credit. Use our bond pricing tool to get a quick ballpark estimate or an exact quote.
No. You will need a bond for each state you are operating in that has a bond requirement. Some states require a bond for each branch location and or loan originator.
Getting licensed in all 50 states can be problematic if you work with the wrong surety agent. Mortgage broker bonds are not insurance for the broker, they are a form of credit. Many mortgage brokers reach their surety credit limitations before being able to get licensed in all 50 states.
However, we can group bonds into bulk underwriting programs which allows brokers to exceed their surety credit limits by 10-20x. By doing so, the majority of our mortgage broker clients can get licensed nationwide.
Yes. Although it will raise the price for the bond significantly.
Our online application will provide you with an instant quote online.
Professional liability insurance protects the broker in the event of a claim. Mortgage broker bonds provide protection for the public, not the broker. In the event of a claim on the bond, the bonding company will look to the broker for reimbursement. Therefore, mortgage brokers bonds are truly a form of credit to the broker and insurance to the public.
Both liability insurance and surety bonding are needed when operating as a mortgage broker. It is best to obtain insurance from a trusted Property & Casualty insurance agent, while surety bond requirements are always best left to those who specialize in them.
No. Some mistakenly refer to these bonds as "mortgage bonds", but that is a different product. These bonds are a type of surety bond in place to guarantee the broker's license. Mortgage bonds are investment bonds backed by real estate or physical property, such as equipment. The mortgage bond market provides investors protection in the event of a default.
How to Lower Your Mortgage Broker Bond Costs
The best way to decrease your bond costs is to fix any personal credit issues, as pricing is mostly based on your personal credit. Other tips to lower your bond costs include providing strong financials and having your U.S. citizenship. Find out more about lowering your mortgage broker bond costs.
Bond Claims Can Put Your Assets at Risk
You’re responsible to pay bond claims in full which can be as large as the full bond amount (including legal costs). The indemnity agreement you must sign to obtain your mortgage broker bond is a legal contract that pledges your corporate and personal assets in the event of bond claims. Watch our video for an explanation of how bond claims work. Unfortunately, most bond agencies won’t take the time to explain how claims can put you at risk and how to avoid them; if this happens when working with a bond agent it should be a big red flag to re-evaluate doing business with them. Your bond agent should be your first line of defense against bond claims.
How to Avoid Bond Claims
Ensure you conduct your business professionally and ethically, while following the rules of your bond. Remember, you’re responsible to pay for bond claims that you cause. If you need help understanding exactly what your bond guarantees you will and will not do, please contact a bond professional.
Mortgage Broker Bond Process: Three Step Guide
#1: Determine Your Requirements
Find out your bond requirements by selecting your state from the map below. Some states require separate mortgage broker bonds for branch locations and each loan originator. Also, if you want to operate in several states, you’ll have to obtain a mortgage broker bond in each state that requires them. If you need assistance determining which bond you need, it is best to contact a bond professional. In addition to getting a mortgage broker bond, most states will require mortgage brokers to pass a written qualified test, complete pre-licensure education courses and obtain Errors and Omissions (E&O) Insurance.
Select Your State
Make sure you visit the Nationwide Mortgage Licensing System & Registry (NMLS) website to find out what pre-licensure education requirements you need to meet, view the approved course provider list and see the pre-licensure education FAQ’s.
#2: Get Approved for Your Bond
Once you determine the bond requirements you must meet, your next step is to apply for your mortgage broker bond and get instantly approved.
#3: Sign and Submit Your Bond to the State
After you receive your surety bond, you must:
- Sign your bond
- Make a copy for your records
- Send the signed bond to the state (along with any other important paperwork provided by the state or bond agency)
Once you send your signed bond to the state, they will send you your mortgage broker license. This process can take anywhere from one to three weeks depending on the state and its workload.
Getting Mortgage Broker Bonds with Bad Credit
You can obtain mortgage broker bonds with credit issues. However, not all bond agencies will be able to approve you. Your personal credit is the primary item that is considered when you apply for your bond, as it’s used to get an idea of your probability of causing claims and your ability to pay them. Things like unpaid collections or tax liens on your credit report are a negative reflection of how you handle your finances, and can result in getting declined for a bond if you work with the wrong bond agency. Unfortunately, even if you get approved for your mortgage broker bond with credit issues, your costs will likely be higher. Use our free estimate tool to find out what your bond will cost.
How Mortgage Broker Bonds Benefit You (and your clients)
Your bond protects your clients. If you break the law or any other rules while operating as a mortgage brokerage, your clients can file claims on your bond. However, your bond benefits you as well, as the surety bond alternatives have several disadvantages.
What You Need Besides Mortgage Broker Bonds
There are several things you must do after you obtain your mortgage broker bond, including completing continuing education and taking part in a criminal background check. Find out what else is required of you as well as some tactics to beat out your local competitors.
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