What are California finance & mortgage broker bonds?
Finance and mortgage broker bonds are legally binding agreements between three parties:
- Finance professionals such as mortgage brokers and finance lenders
- The government agency that requires the bond
- A surety company
The government agency is known as the Obligee. Below are some of the Obligees that require finance bonds in California:
- The California Department of Financial Protection and Innovation (DFPI)
- The California Department of Real Estate
- The Commissioner Of Corporations
Finance and mortgage broker bonds provide a guarantee that licensed finance professionals conduct business in compliance with the regulations set forth in the California Financial Code
If the finance professional fails to comply with the regulations, the surety company will pay out financial losses to damaged parties up to the full bond amount. The finance professional is liable to reimburse the surety for any damages paid under the bond.
How much do California finance & mortgage broker bonds cost?
The California DFPI requires all mortgage brokers and finance lenders to post a surety bond with a minimum of $25,000 worth of coverage. The required bond amount varies based on the aggregate amount of loans the licensee originated in the previous year:
- Up to $1 million in aggregate loans: $25,000 surety bond
- $1 million to $50 million in aggregate loans: $50,000 surety bond
- $50 million to $500 million in aggregate loans: $100,000 surety bond
- Over $500 million in aggregate loans: $200,000 surety bond
The Commissioner Of Corporations of The State Of California requires the following finance bonds:
- $500,000 Check Sellers, Bill Payers and Proraters Bond
- $25,000 Deferred Deposit Transaction Law License Bond
- $750,000+ Underwritten Title Company Bond
The surety company issuing the bond determines your premium rate, which is the percentage of the total bond amount you pay as the premium. Premium rates for California finance and mortgage broker bonds typically cost between 1% and 5% of the total bond amount.
During the application process, the surety company evaluates your personal credit, 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 California mortgage broker bond. EZSurety still offers competitive rates to individuals with low credit scores or other financial issues.
How to get your mortgage broker license in California?
The State of California requires all finance lenders and brokers to obtain a California Finance Lenders license to be eligible to conduct business in the state. The requirements to obtain the license vary depending on whether the licensee performs residential lending or brokering services.
Here is what you need to become licensed for residential lending or brokering:
- Meet the minimum net worth requirements ($50,000 for brokers, $250,000 for lender/brokers)
- Must have no criminal history or any sanctions resulting from dishonesty, fraud, or deceit.
- Post a surety bond with the appropriate amount of coverage
- Pay the $100 investigation fee and $200 application fee
Applications for residential lenders and brokers must be filed through the Nationwide Mortgage Licensing System (NMLS) website.
For information on obtaining other finance licenses in California, you can visit the NMLS Resource Center.