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Mortgage Broker Bonds

What is a Mortgage Broker Bond?

Mortgage Broker Bond

A Mortgage Broker Bond is a commercial license surety bond that could be a required condition of gaining a license to operate as a mortgage broker.

Mortgage Broker Bonds involve three parties:

  • The principal is the mortgage broker who purchases the bond to prove that their business is trustworthy. The principal must take financial responsibility for any claim filed against the bond.
  • The obligee is the state, and the mortgage broker's clients, who can make claims against the bond if the mortgage broker violates provisions of the bond. As long as those claims prove to be valid under investigation, the surety guarantees payment.
  • The surety is an underwriter who issues the bond to the mortgage broker. The surety also backs the bond, meaning it agrees to pay any valid claims when the principal can't or won't - but the surety does not accept the final financial responsibility. If and when they settle a claim, the principal must pay that debt back in full with interest and fees included in the cost.

When Do I Need a Mortgage Broker Bond?

In many states, mortgage brokers need to purchase a surety bond in order to become legally licensed. The state will not issue you a license until you can prove you have the required mortgage broker surety bond. Usually, you are required to hold a Mortgage Broker Bond for as long as you maintain your mortgage broker license. If you perform the services of a mortgage broker without either a license, bond, or either, you could be subject to fines and penalties, including being barred from ever obtaining a license again.

Laws that regulate mortgage professionals vary by state. Some states have bonding requirements that apply to all mortgage professionals while others have specific requirements that vary by profession. Contact a Viking Bonds agent and we will help you understand your mortgage broker surety bond requirements.

Why Do I Need a Mortgage Broker Bond?

State laws require mortgage broker surety bonds to protect the state and public against potential losses resulting from actions by the mortgage broker that violate state laws and regulations. These laws exist to keep the housing industry fair and to hold unscrupulous mortgage brokers accountable. Without a bond in place, homeowners would have a far more difficult time seeking justice and financial compensation from brokers who bend or break the rules.

Benefits for the Obligees:

In the case of wrongful action on the part of the mortgage broker, the state or the mortgage brokers' clients can make a claim against the Mortgage Broker Surety Bond to seek financial reparations. They can seek damages to cover the total cost of any negative behavior on the part of the mortgage brokers. Payment is guaranteed for valid claims up the value of the bond. For a bond valued at $50,000, for example, the surety will not pay out $75,000 in damages.

How Much Are Mortgage Broker Bonds Written for?

The amount of the Mortgage Broker Bond depends on the state, the broker's credit, and the annual volume of loans closed by the broker. In most states there is a legal minimum amount, with increases applied based on the broker's particular credit and loan history. Your bond amount could range anywhere from $10,000 to $100,000, depending on your profile and the state in which you acquire your bond. Keep in mind that the cost of a mortgage broker surety bond is only a fraction of the total value. Mortgage brokers who need a six-figure bond will not pay anywhere near that amount.

How Much Do Mortgage Broker Surety Bonds Cost?

The cost of a Mortgage Broker Bond is calculated as a percentage of the bond amount, depending on the broker's credit. Usually, the cost is around 1-3% of the total bond amount. If you have bad credit, you may still be able to secure a Mortgage Broker Bond, but you will likely have to pay a higher percentage. For help getting a bond with bad credit, rely on the team at Viking Bond Service - we have special resources available to help more people get the bonds they require.

What Do You Need to Secure a Mortgage Broker Bond?

Credit score is the most important factor in securing a Mortgage Broker Bond. You will also need to complete a standard bond application with information about your history, financial standing, and business background. Underwriters at the surety evaluate each application individually and may require additional documentation about your finances or business before they make a decision about whether to grant the bond and how much to charge. Expect to get a quote back from Viking Bond Service in as little as 24 hours.

Request a Mortgage Broker Bond Quote from Viking Bond Service

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