Mortgage Broker Bonds

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Learn more about mortgage broker bonds below, and contact us today to request a quote. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

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FREE MORTGAGE BROKER BOND QUOTE

What Are Mortgage Broker Bonds?

Mortgage broker bonds are a type of license bond. Knowing what mortgage brokers are licensed to do is helpful in understanding why they’re needed and how they work.

Mortgage brokers are intermediaries between those who are seeking a mortgage and the financial institutions that make mortgage loans. In that “middleman” capacity, mortgage brokers have many legal and ethical obligations. A mortgage broker bond serves as a mortgage broker’s pledge to live up to all of those obligations.

Thus, a mortgage broker bond does the following:

  • Guarantees that the mortgage broker operates in a lawful and ethical manner, in accordance with all applicable laws and regulations.
  • Indemnifies the state against liability for damages stemming from the non-compliant actions of a licensed mortgage broker.
  • Provides a process and a source of funds for compensating parties injured financially by the unlawful or unethical actions of the mortgage broker.

Who Needs Them?

There are only a few states that don’t require a mortgage broker to purchase a mortgage broker bond as a prerequisite for initial licensure and ongoing license renewal. When a mortgage broker bond is required, it must remain in force at all times to prevent license suspension or revocation.

How Do They Work?

A mortgage broker bond is a legally binding contract involving three parties with different roles and responsibilities:

  • The “obligee” is the state licensing authority requiring the bond and establishing the required bond amount, which is the maximum amount that will be paid out on a single claim.
  • The “principal” is the mortgage broker purchasing the bond. They are legally obligated to pay all valid claims against the bond.
  • The “surety” is the company that authorizes the bond and determines the annual premium rate.

Upon receipt of a claim, the surety will investigate to make sure it’s valid and should be paid. If the surety is unable to negotiate a settlement, and the principal does not pay the claim promptly, the surety typically steps in and pays the claim. In making that payment on behalf of the principal, the surety is extending credit to the principal and creating a debt that the principal is legally obligated to reimburse.

What Do They Cost?

Two factors enter into the calculation of the annual premium that the principal will pay for a mortgage broker bond: the required bond amount and the premium rate set by the surety.

The surety is mainly concerned about the risk involved in potentially extending credit to the principal by paying claims on the principal’s behalf. The best indicator of creditworthiness is the principal’s personal credit score, so that’s the primary underwriting consideration in determining the premium rate.

With a good credit score, the premium rate should be in the range of one to three percent of the required bond amount.

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Learn more about mortgage broker bonds below, and contact us today to request a quote. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

CONTACT US FOR A

FREE MORTGAGE BROKER BOND QUOTE

What Are Mortgage Broker Bonds?

Mortgage broker bonds are a type of license bond. Knowing what mortgage brokers are licensed to do is helpful in understanding why they’re needed and how they work.

Mortgage brokers are intermediaries between those who are seeking a mortgage and the financial institutions that make mortgage loans. In that “middleman” capacity, mortgage brokers have many legal and ethical obligations. A mortgage broker bond serves as a mortgage broker’s pledge to live up to all of those obligations.

Thus, a mortgage broker bond does the following:

  • Guarantees that the mortgage broker operates in a lawful and ethical manner, in accordance with all applicable laws and regulations.
  • Indemnifies the state against liability for damages stemming from the non-compliant actions of a licensed mortgage broker.
  • Provides a process and a source of funds for compensating parties injured financially by the unlawful or unethical actions of the mortgage broker.

Who Needs Them?

There are only a few states that don’t require a mortgage broker to purchase a mortgage broker bond as a prerequisite for initial licensure and ongoing license renewal. When a mortgage broker bond is required, it must remain in force at all times to prevent license suspension or revocation.

How Do They Work?

A mortgage broker bond is a legally binding contract involving three parties with different roles and responsibilities:

  • The “obligee” is the state licensing authority requiring the bond and establishing the required bond amount, which is the maximum amount that will be paid out on a single claim.
  • The “principal” is the mortgage broker purchasing the bond. They are legally obligated to pay all valid claims against the bond.
  • The “surety” is the company that authorizes the bond and determines the annual premium rate.

Upon receipt of a claim, the surety will investigate to make sure it’s valid and should be paid. If the surety is unable to negotiate a settlement, and the principal does not pay the claim promptly, the surety typically steps in and pays the claim. In making that payment on behalf of the principal, the surety is extending credit to the principal and creating a debt that the principal is legally obligated to reimburse.

What Do They Cost?

Two factors enter into the calculation of the annual premium that the principal will pay for a mortgage broker bond: the required bond amount and the premium rate set by the surety.

The surety is mainly concerned about the risk involved in potentially extending credit to the principal by paying claims on the principal’s behalf. The best indicator of creditworthiness is the principal’s personal credit score, so that’s the primary underwriting consideration in determining the premium rate.

With a good credit score, the premium rate should be in the range of one to three percent of the required bond amount.

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Request a quote online or call today to speak with one of our surety bond experts about obtaining a mortgage broker bond.