To work as a mortgage broker in the state of Washington, you'll need to meet all of the licensing requirements set by the Washington State Department of Financial Institutions. The Department of Financial Institutions Division of Consumer Services regulates mortgage brokers and is where you apply for your mortgage broker license.
A mortgage broker will negotiate with a lender to try to secure a residential mortgage loan with the best rates for their clients. They might deal with a large loan volume and owe fiduciary duties to prospective homebuyers.
Among the other requirements for obtaining your mortgage broker license, you must post a $20,000 electronic surety bond through the Nationwide Multistate Licensing System (NMLS). Your bond must show in the NMLS system before you can submit your license application. Here's what to know about a Washington mortgage broker bond and how to obtain one.
What Is a Washington State Mortgage Broker Bond?
A mortgage broker bond is only one bond type of the many different Washington surety bonds. Bonds are not insurance but are instead legal agreements between three parties, including:
- Principal - The individual who has surety bond requirements
- Obligee - The regulatory body, private party, or government agency that sets the surety bond requirements
- Surety - The bond company or insurance company that issues the bond
Unlike an insurance policy, a bond does not protect the bonded party against liability. Instead, a surety bond protects the public against the bondholder's potential misconduct. If you break the law or engage in other types of misconduct, the injured party can file a bond claim with the surety company.
The bond company will investigate the claim. If it determines that the claim is valid, the bonding agency will pay the bond claim up to the full amount of the bond. However, it will seek reimbursement from you. When you get a surety bond, you will have to sign an indemnity agreement through which you will hold the surety harmless if a claim is filed. This means that you will have the ultimate obligation of paying any valid claims filed against your bond.
The Mortgage Brokers Practices Act grants the Director of the Department of Financial Institutions authority to regulate mortgage brokers and loan originators and licensure for mortgage broker license applicants in Washington state. This law regulates both licensed mortgage brokers and loan originators. The primary difference between a Washington state mortgage broker and a loan originator is that a broker works for a designated broker at a mortgage broker business and a loan originator works for a lender financial institution, including a bank or credit union.
- Applicants for licensure as a mortgage broker business must complete a number of steps in the licensing process as described in the Washington mortgage broker license guide:
- Register your business structure with the Washington Secretary of State
- Obtain a Washington business license
- Pay the licensing fees, including the NMLS fees, through NMLS
- Include the name of your company's designated broker
- Submit fingerprints for a criminal background check
- Submit an electronic bond form showing you have posted a surety bond in the bond amount of $20,000
- Mail the certification that you have reviewed the laws and understand your trust accounting requirements for the management of client funds and the authorization for the Department of Financial Institutions to examine your business's trust accounts
Now that you have a general overview of the licensing steps, it's important to understand how much it costs, the requirements, and how to obtain your mortgage broker bond.
How Much Does a Mortgage Broker Bond Cost in Washington?
To become a licensed mortgage broker, one requirement you will have is to post a bond in the amount of $20,000. This doesn't mean that you will have to pay $20,000 to get a bond. Instead, your bond application will undergo underwriting to allow the surety to evaluate your degree of risk. The company will give you a free quote after assessing your application for the bond premium, which is the amount you will have to pay for your bond.
If you have good credit, you can anticipate being charged as little as 1% of the total bond amount. Conversely, if you have bad credit, you might have to go through a bad credit program. While you can anticipate having to pay a higher percentage to secure a bad credit surety bond, you can still get bonded. If you work to improve your credit score, you can get a lower bond quote when it's time to renew your bond.
Mortgage Brokers Surety Bond Requirements
Mortgage broker surety bonds fall into a category of bonds called license and permit bonds. These are surety bonds that are required for licensure. You'll generally need to achieve and maintain a good credit score, know and comply with the regulations and laws that govern the mortgage industry, and keep the best interests of your clients at the forefront. By operating your business in an ethical manner and following the law, you can build a good relationship with your bond company and clients, avoid bond claims, and keep your license in good standing.
How to Obtain a Washington Mortgage Broker Bond
Step 1: Find the Requirements
Once you find out the bond requirements you must meet, your next step is to apply for your mortgage broker bond and get approved.
Step 2: Get Your Bond Approved
In this step, you’ll need to submit your bond request and get a free quote. Once we receive your application, one of our surety bond experts will guide you through the process and make sure that all the conditions are clear for you.
If you decide to purchase the bond, you'll need to pay the bond premium. Once you do, you'll then need to sign the indemnity agreement. We will then submit an electronic copy of the bond form to the NMLS for you.
Step 3: Sign and Submit Your Bond to the Washington 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’ve completed the mortgage broker requirements and sent your signed bond to the state, they will send you a mortgage broker license. Depending on the state workload, this process can take anywhere from one to three weeks.