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Mortgage Lender Surety Bonds

What is a Mortgage Lender Bond?

Mortgage Lender Bond

A Mortgage Lender Bond is a commercial license surety bond that may be required to become licensed to operate as a mortgage lender.

There are three parties involved in a Mortgage Lender Bond:

  • The principal is the mortgage lender who purchases the bond to guarantee their integrity. By signing the bond agreement, the principal also takes financial responsibility for any claims filed against the bond by the obligee.
  • The obligee is the state and the mortgage lender's clients, who can make claims against the bond if the mortgage lender violates provisions of the bond. The surety investigates every claim it receives, and upon proving a claim is valid, settles it in full without further delay.
  • The surety is the underwriter who issues the bond to the mortgage lender and backs the bond as well, which means they agree to settle all valid claims. After settling, however, the surety has the right to collect the amount of the settlement from the principal - the party who is ultimately responsible.

When Do I Need a Mortgage Lender Bond?

Usually, you are required to get a Mortgage Lender Bond before obtaining your license, and you are required to maintain the surety bond for as long as you retain your license. You can't obtain a license without a bond, and you can't legally act as a mortgage lender without a license or a bond. However, requirements vary in each state. Contact a Viking Bond Service agent, and we'll be happy to help you understand your Mortgage Lender Bond requirements.

Why Do I Need a Mortgage Lender Surety Bond?

Mortgage Lender Bonds exist to provide protection to the mortgage lender's clients and the state against any potential loss that occurs due to violations of state laws and regulations committed by the mortgage lender. You are legally required to carry one of these bonds at all times or potentially face strict penalties. The penalties vary depending on the state you operate in and the nature of the violation. However, in all states it is illegal to originate mortgage loans without a license, and you can't get a license without first obtaining a bond. Mortgage lenders are required to maintain an active surety bond for as long as the Mortgage Lender license is to remain valid, meaning it's almost impossible to operate legally without a surety bond. Most mortgage lenders consider the bond premiums to be just another business expense that they work into their annual operating budget.

Benefits for the Obligees

Mortgage Lender Bonds protect customers from illegal and unethical practices within the mortgage lending process. The terms of the bonds vary, but they could entitle consumers to financial reparations in the event that a mortgage lender:

  • approves a loan to a borrower that the lender knows the borrower will be unable to repay.
  • charges fees that are unnecessary or excessive.
  • encourages the buyer to commit fraud while applying for a loan.
  • pressures buyers to purchase particular products, such as high-interest rate or high-risk loans.
  • intentionally seeks out vulnerable and at-risk buyers to recommend cash-out refinances.
  • bases the interest rate for a loan on any factor other than the borrower's credit history.

Benefits for the Principals

Mortgage Lender Bonds hold the principal financially accountable for any valid claims filed against the bond. Yet despite their punitive nature, these surety bonds benefit the principal as well. Mortgage lenders who are licensed and bonded demonstrate to potential clients that they are trustworthy, transparent, and willing to be held accountable. Taking out a mortgage is a big financial commitment and a substantial personal risk - no wonder people are more inclined to work with lenders who follow the rules to the letter. The bond requirement also helps to improve the character and perception of the mortgage lending industry as a whole, which then benefits all the mortgage lenders involved in it. It's easy to feel like bonds are an unnecessary expense. The truth is that they're good for everyone involved, including the principal.

How Much Are Mortgage Lender Bonds Written for?

Mortgage Lender Bond amounts depend on the state where the mortgage lender acquires the bond. Most of the time there is a legal minimum bond amount, and the actual amount depends on several factors, such as credit history and the amount of loans closed annually. Based on the state and your profile, your bond amount could range from $10,000 to $100,000. The state government agency that administers mortgage licenses typically informs the lender of the amount or calculation. Contact Viking Bond Service for help figuring out exactly what your state requirements are.

How Much Do Mortgage Lender Bonds Cost?

Mortgage Lender Bonds are charged as a percentage of the bond amount, and depend on your credit. Typically, the bond costs between 1-3% of the total amount of coverage provided by the bond. Apply for a quote with Viking Bond Service to find out exactly how much your surety bond will cost.

What Do I Need to Secure a Mortgage Lender Bond?

Your personal credit is the most important factor determining your ability to obtain a Mortgage Lender Bond. When you apply for a bond you typically have to supply information about your liabilities and assets as well as your financial history. A surety bond provider like Viking Bond Service will evaluate this information to determine how likely you are to pay the company back after it pays a claim against the bond. Mortgage lenders with great credit will get approved at the best rates, but those with bad credit won't necessarily be denied. It's still possible to get approved for mortgage lender surety bonds with higher premiums due to the higher perceived risk of issuing the bond. The team at Viking Bond Service is committed to helping all applicants get approved for the best rates/terms available.

Do All Mortgage Lenders Need a Surety Bond?

Lenders in all 50 states are required to obtain a mortgage lender surety bond and carry it for as long as they have their license. Surety bonds are typically renewed annually by repaying the premium in full. If there is any confusion about whether you need a bond and what that bond must entail, contact Viking Bond Service to get information directly from our experts.

How are Claims Handled for a Mortgage Lender Bond?

First, the surety provider that backs the bond launches a comprehensive investigation. They will use whatever resources necessary - lawyers, investigators, experts etc - to prove whether or not a claim is true. Provided that the details hold up, the obligee who filed the claim receives an immediate payout - as long as the amount of the claim does not exceed the value of the bond. This does not complete the claim process however. The principal now has a debt to the surety rather than the obligee. The process is not complete until the principal pays the surety back the full amount plus interest and the cost of the investigation.

Obtaining a Mortgage Lender Surety Bond

Ideally, you should apply for a bond as soon as possible. You won't be able to obtain a license until the bond process is complete, and there may be unexpected setbacks along the way. Luckily, applying for surety bonds for mortgage lenders is easy, especially when you work with Viking Bond Service. Our digital bond application is available for you to complete 24/7. You will need to supply some basic information about yourself, your business, and your finances. Underwriters will review your application, evaluate your financial risk (which is the likelihood that you will pay back the surety company), and then quote you a rate. Viking Bond Service does everything possible to approve all qualified applicants, even those with low credit. After you pay the premium and show proof of the bond to the applicable state agency, your bond requirement is satisfied until the bond is up for renewal.

Get Your Mortgage Lender Bond Fast

Mortgage Lender Bonds are generally easy to process, which makes for a quick bonding process. Most of the time you can receive a quote for a Mortgage Lender Bond within 24 hours.

Three Easy Ways to Request a Mortgage Lender Surety Bond Quote Today:

To request a Mortgage Lender Bond quote or learn more information about any surety bonds offered by Viking Bond Service, you can call us at 1-888-278-7389 and speak with a Viking Bond Service representative, who will be happy to help you. You may also contact us by submitting an online application, filling out the contact form on the current page, or emailing us and one of our agents will contact you shortly.

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