Mortgage broker bonds are legally binding agreements between three parties: finance professionals (such as mortgage brokers or lenders), the government agency responsible for regulating mortgage loan activity in the local jurisdiction, and a surety company.
The government agency is the Obligee and establishes the obligations that the licensed mortgage broker (the Principal) must follow. The surety (also called bonding company) issues the bond guaranteeing the performance of the broker or lender.
Mortgage broker and finance bonds are required for eligibility to operate as a mortgage broker, mortgage lender, or mortgage loan originator. The Nationwide Multistate Licensing System (NMLS) handles the licensing requirements and bond filing in most states.
When the surety company issues the bond, they provide the government agency a guarantee that the customers of a licensed mortgage broker or finance lender will receive payment for financial losses resulting from a violation of the statutes and regulations set forth by the obligee.
If the mortgage professional fails to meet the obligations set out by the government agency, the surety will pay out damages up to the bond amount. The mortgage professional is liable for the losses and is legally required to reimburse the surety company for any damages paid under the bond.
Mortgage broker surety bond costs vary depending on the total bond amount and the premium rate. The regulating agency sets the required bond amount and the surety company determines your premium rate, which is the percentage of the total bond amount you pay as the premium.
Premium rates for mortgage broker bonds typically range between 0.75% and 5% of the total bond amount. During the application process, the surety company evaluates your credit score, financial statements, industry experience, and licensing history. Applicants with good credit generally receive the lowest rates, however, bad credit will not prevent you from securing a mortgage broker bond. EZSurety can still offer competitive rates to individuals with low credit scores or other financial issues.
Below are the lowest premiums EZ Surety has been able to issue for mortgage broker bonds in popular states.