Month: September 2019

Types of Mortgage Broker Licenses in Texas

In Texas, individuals and companies working in the mortgage industry operate under the supervision of the Department of Savings and Mortgage Lending (SML) and are licensed through the Department�s Division of Licensing. The one exception to this is the licensing of individuals as residential mortgage loan originators, which is handled through the Office of the Consumer Credit Commissioner.

The Department of Savings and Mortgage Lending issues several different licenses and registrations depending on the nature of the work to be performed and the type of entity applying. This article focuses on the process for obtaining an SML license for a mortgage company or sole proprietorship.

The Licensing Process

Texas mortgage company licenses are processed through the Nationwide Mortgage Lending System (NMLS). Still, certain documents need to be submitted by mail or fax to SML. Failure to do so in a timely manner can cause serious delays in NMLS processing on your application. Instructions and information related to applying for an SML license are available on the NMLS website.

Applicants for a Mortgage Company license must complete 20 hours of NMLS-approved pre-licensure educational requirements and pass an exam, as required by the Texas Safe Act. Once licensed, a certain number of hours of continuing education must be completed every year in order for the license to be renewed.

In addition to completing educational requirements, applicants for a new mortgage company license from SML must:

• Maintain a physical office in the state of Texas
• Submit the application and upload or mail all required documents, including personal financial statements and evidence of experience and/or education in the real estate mortgage industry
• Agree to a credit check
• Pay a licensing fee and an NMLS processing fee
• Obtain a $50,000 surety bond

Why Is a Surety Bond Required?

State agencies require license bonds for certain types of businesses and professions as a way to protect consumers against financial loss caused by the unlawful or unethical actions of licensees. A mortgage company license bond (also known as a mortgage broker bond), is a licensee�s pledge to abide by all applicable laws, rules, and regulations.

A surety bond agreement brings together three different parties�the obligee, the principal, and the surety�in a legally binding contract:

• The Department of Savings and Mortgage Lending is the obligee, the party requiring the bond.
• The license applicant required to purchase the bond is the principal.
• The company underwriting the bond is the surety.

The obligee establishes the required bond amount at $50,000, which is the maximum amount that can be claimed by a party who has suffered a financial loss due to the actions of the principal. This is also referred to as the bond�s �penal� amount.

What Happens if a Claim is Filed?

Upon receipt of a claim, the surety will investigate to make sure it is valid and will attempt to negotiate a settlement with the claimant. If no agreement can be reached, the surety will pay the claim on the principal�s behalf. Any such payment is essentially a short-term loan to the principal, who is legally responsible for paying claims against the license bond. Surety bond contracts contain a clause indemnifying the surety and placing the responsibility for paying claims firmly on the shoulders of the principal.

What Does It Cost?

The applicant for a surety bond will pay an annual premium that is a small percentage of the required $50,000 bond amount.

The surety establishes the premium rate on the Applicant�s personal credit score and financial circumstances. Applicants with good credit typically pay a premium of between 1% and 3% of the required bond amount. Applicants with poor credit will pay a higher premium rate.

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Our surety bond experts have the knowledge and experience to advise you and help you get the bond you need to submit as part of the process of obtaining an Texas mortgage broker license.

What Types of Broker Licenses Are Issued in Missouri?

The residential mortgage business in Missouri is regulated by the Missouri Division of Finance, which issues both new and renewal licenses to residential mortgage loan brokerage firms. This includes sole proprietorships that are headquartered in Missouri. The Division also licenses individual mortgage loan originators.

Residential mortgage loan brokers, both companies and sole proprietorships, headquartered outside of Missouri need to apply for Missouri registration in order to operate within the state. This article focuses on the licensing process for brokers based in Missouri.

What Does the Licensing Process Involve?

To become licensed as a residential mortgage loan broker in Missouri, a company or sole proprietorship must:

• Maintain a full-service, staffed office in Missouri that is open to the public
• Have relevant industry experience
• Agree to criminal background and credit checks
• Purchase a Missouri Mortgage Loan Broker Bond in an amount of at least $50,000 (but no more than $1 million, based on loan volume
• Pay a one-time application fee (currently $300)
• Pay an annual license fee (currently $600)

There is no educational or examination requirement for those applying for licensure or registration as a residential mortgage loan broker.

License applications are submitted through and processed by the Nationwide Mortgage Licensing System (NMLS), though the surety bond and certain other documents must be mailed to the Missouri Division of Finance, Mortgage Licensing Section in Jefferson City.

Why Is a Surety Bond Required?

The surety bond requirement helps ensure that licensees conduct their business in compliance with state law and industry standards by making them legally liable for financial losses resulting from their unlawful or unethical actions. The bond provides financial protection for both the state and consumers, not for the mortgage loan broker.

The surety bond agreement is a legally binding contract between three parties:

• The Missouri Division of Finance requires the bond and is known as the “obligee.”
• The mortgage broker required to purchase the bond is the “principal.”
• The company that issues the bond is the “surety.”

If the principal violates any of the terms of the contract, a party who suffers a financial loss as a result has the right to file a claim against the bond and seek compensation

What Happens if a Claim is Filed?

The first thing that happens when a claim is filed against the licensee�s bond is an investigation. The surety will work to make sure that the claim is valid. The surety will attempt to settle a valid claim, but if that is unsuccessful, the surety will go ahead and pay the claim to avoid legal action.

But that�s not the end of the story. The principal, not the surety, is legally responsible for paying claims. Any payment to a claimant by the surety is merely an advance to the principal, to provide a little breathing room for the principal to gather the necessary funds. The principal must then reimburse the surety or face legal action.

What Does It Cost?

The annual premium for a Missouri Mortgage Broker Bond is a small percentage of the required bond amount. Although the minimum bond amount for a new licensee is $50,000, the minimum amount is recalculated at each renewal, based on the broker�s previous year�s loan volume.

The percentage of the loan amount that a given applicant will pay (i.e., the premium rate) is set by the surety, based on the applicant�s personal credit score and financial status. Applicants with good credit will typically pay a premium rate of 1% to 3%, while those with credit issues will likely pay a higher rate because of the higher risk the surety is assuming.

Get The Bond You Need

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Mortgage Broker Licenses in Michigan

The Michigan Department of Insurance and Financial Services (DIFS) licenses individuals and companies working in the residential mortgage industry anywhere within the state. Companies and sole proprietors can obtain a license as a broker, as a broker and lender, or as a broker lender, and servicer.

In any of these three categories, there are separate licenses for those dealing with first mortgages and those dealing with second mortgages on residential properties located in the state of Michigan. Individuals doing loan origination work must obtain a mortgage loan originator license or prove that they are covered under their employer�s license.

What Does the Licensing Process Involve?

While DIFS regulates and oversees licensing in Michigan�s residential mortgage industry, license applications are submitted through the National Mortgage Licensing System (NMLS). There is a non-refundable $100 NMLS user fee in addition to a non-refundable application fee, which varies depending on the type of license.

All applications, for both new and renewal licenses, must be accompanied by a surety bond unless eligible for an exemption, as illustrated below.

Type of License

Surety Bond Amount

Eligible for Exemption

1st Mortgage Broker and Lender

$25,000

No

1st Mortgage Broker

$25,000

Yes *

1st Mortgage Broker, Lender, and Servicer

$125,000

No

2nd Mortgage Broker and Lender

$25,000

No

2nd Mortgage Broker (License)

$25,000

Yes *

2nd Mortgage Broker (Registration)

$25,000

Yes *

Second Mortgage Broker, Lender, and Servicer (License)

$125,000

No

2nd Mortgage Broker, Lender, and Servicer (Registration)

$125,000

No

Mortgage Loan Originator (individual)

$10,000 (first-time license);

$25,000 or $50,000 renewals, based on previous year�s loan volume

No

Mortgage Loan Originator (company)

$50,000, $150,000, or $250,000 based on previous year�s loan volume

No

* If funds will not be received from prospective borrowers before closing a mortgage loan.

Why Is a Surety Bond Required?

The surety bond is a licensee�s guarantee to conduct business in accordance with all applicable laws, rules and regulations governing the residential mortgage industry, as specified by the terms of the surety bond agreement. Any violation of the agreement can result in a claim being filed against the licensee�s surety bond for up to the full penal amount of the bond.

A surety bond agreement brings together three parties in a legally binding contract:

• The entity requiring the bond, DIFS in this case, is the obligee.
• The party required to purchase the bond (the residential mortgage broker, lender, servicer, or originator) is the principal.
• The company issuing the bond is the surety.

The roles and responsibilities of each party are spelled out in the surety bond agreement.

What Happens if a Claim is Filed?

Upon receiving notice of a claim, the surety will first make sure that the claim is valid, and will then try to negotiate a settlement. If that attempt is unsuccessful, the surety will usually pay the claim as an advance of funds to the principal.

By paying the claim, the surety is essentially making a short-term loan to the principal, which the principal is required to repay. Surety bond contracts include an indemnification clause that relieves the surety of any obligation to pay claims. The responsibility for paying claims rests solely with the principal.

What Does a Mortgage Broker Bond Cost?

The surety charges the principal an annual premium that is a small percentage of the required bond amount. That percentage is established by the surety based on the principal�s personal credit score and financial condition. Those with good credit will usually be assigned a premium rate that is between 1% and 3% of the bond amount, but bond applicants with poor credit will pay a higher rate because of the greater risk that the principal will not be readily reimburse the surety for claims paid in advance.

Get Bonded Today for Mortgage Broker Licensing Success

At Single Source Insurance, our surety bond experts will answer any questions you may have about the bonding process and help you get the license bond you need as a residential mortgage professional.

Mortgage Broker Licenses Issued in Alabama

Alabama mortgage brokers and loan originators are licensed by the State Banking Department under the Alabama Mortgage Brokers Licensing Act. A mortgage broker license enables the licensee to solicit, negotiate, and process residential mortgage loans (both first and second mortgages) on properties located within Alabama.

Mortgage broker licenses are issued to companies and sole proprietors. Mortgage loan originators who work for a mortgage broker must also be licensed by the State Banking Department.

What Does the Licensing Process Involve?

Mortgage broker license applications are submitted to and processed by the Nationwide Mortgage Licensing System (NMLS), but hard copies of certain required documents are mailed directly to:

State Banking Department of Alabama, Bureau of Loans

P.O. Box 4600

Montgomery, AL 36103-4600

If the required documents aren�t received within 5 days of the date that the application was submitted to NMLS, your application can be administratively withdrawn by the Department.

One important document that must be mailed to the State Banking Department is a mortgage broker surety bond. The bond must be in an amount that is based on the volume of residential loans closed in the previous year:

Previous Year�s Loan Volume

Required Bond Amount

$0 to $25 million

$25,000

More than $20 million to $100 million

$50,000

In excess of $100 million

$75,000

For applicants lacking a history upon which to base the required bond amount, the Department will set the amount.

Why Is a Surety Bond Required?

Nationwide, state licensing authorities require license applicants in many professions to purchase a license and permit surety bond. The bond serves as a guarantee that licensees will conduct business in compliance with all applicable laws, rules, regulations, and industry standards.

The mortgage broker bond required by the State Banking Department in Alabama provides protection for those who could suffer a financial loss due to the unlawful or unethical actions of a licensed mortgage broker. The mortgage broker surety bond agreement spells out the behavior required of mortgage brokers in order to avoid claims being filed against the bond.

What Happens if a Claim is Filed?

There are three parties to every surety bond agreement, which is a legally binding contract:

• The obligee, the party requiring the bond, is the State Banking Department.
• The principal, the party required to purchase the bond, is the applicant for a mortgage broker license.
• The surety is the company underwriting and issuing the bond.

The first thing that happens when a claim is filed is for the surety to investigate to ensure that the claim is valid. The surety then typically tries to settle the claim, but if that�s unsuccessful, the surety will pay the claim.

However, the surety bond contract indemnifies the surety and makes the principal solely responsible for paying claims. So any advance payment to a claimant is essentially a loan to the principal�a loan that must be repaid by the principal.

What Does a Mortgage Broker Bond Cost?

The annual premium for a mortgage broker bond is a small percentage of the required bond amount. Because the principal must reimburse the surety for claims paid in advance by the surety, the surety must be relatively confident that the principal is creditworthy. So, the surety�s top concern in determining what premium rate the principal will pay is the principal�s personal credit score.

Bond applicants with good credit typically pay the standard market rate of between 1% and 3% of the required bond amount. Applicants with poor credit will pay a higher premium rate.

Get Bonded Today for Mortgage Broker Licensing Success

We�re here to help you get the surety bond you need in order to obtain or renew your Alabama mortgage broker license.

What Types of Mortgage Broker Licenses Are Issued in Oregon?

What most states refer to as a mortgage broker license is called a mortgage lender license in Oregon. An Oregon mortgage lender license allows the licensee to broker residential mortgage loans as well as make them. Mortgage lender licenses are issued to both companies and sole proprietorships. Oregon also licenses mortgage servicers and mortgage loan originators.

What Does the Licensing Process Involve?

Although the Division of Financial Regulation regulates and oversees Oregon�s mortgage industry and issues licenses for mortgage lending professionals, applications must be submitted through the National Mortgage Licensing System (NMLS). There is a non-refundable $100 NMLS user fee in addition to a non-refundable application fee of $960.

Applications must identify the �Experienced Person� (Qualified Individual), usually the sole proprietor, company owner, or full-time employee who has been involved in mortgage lending for a minimum of three out of the past five years.

All applications, for both new and renewal licenses, must be accompanied by a surety bond. For new license applicants, the required bond amount is $50,000. For renewal licenses, the required bond amount is based on the dollar amount of Oregon residential mortgage loans listed in the mortgage call reports filed for the previous four quarters. The Division of Financial Regulation will send a notice stating the required renewal bond amount prior to the license renewal date.

Why Is a Surety Bond Required?

A mortgage broker surety bond is required as protection for the state and consumers against financial losses caused by the unlawful or unethical mortgage brokering or lending practices of a licensed mortgage lender. The bond serves as the mortgage lender�s guarantee to comply with all relevant Oregon laws and the rules established by the Division of Financial Regulations identified in the surety bond agreement.

A surety bond agreement is a legally binding contract among three parties:

• The Division of Financial Regulation, as the party requiring the bond, is the obligee
• The mortgage lender or broker is the principal
• The company issuing the bond is the surety

Any violation of the terms of the surety bond agreement can trigger a claim against the bond, which the principal is legally responsible for paying.

What Happens if a Claim is Filed?

Upon receiving notice of a claim, the surety will investigate to verify the claim�s validity. If found to be valid, the surety will then attempt to negotiate a settlement. If no agreement is reached, the surety will typically pay the claim, but only as an advance on behalf of the principal. The principal is then required to reimburse the surety. In essence, the advance payment by the surety is a short-term loan to the principal.

What Does a Mortgage Broker Bond Cost?

Nearly all surety bonds are sold for a premium that is a percentage of the required bond amount. That percentage, known as the premium rate, is determined by the surety based on the principal�s personal credit score and financial standing. Applicants with good credit generally pay a premium that is between 1% and 3% of the bond amount, while those with poor credit will pay a higher rate.

Get Bonded Today for Mortgage Broker Licensing Success

Use our convenient online system to apply for the surety bond you�ll need to get your Oregon mortgage lender license.

What Types of Mortgage Broker Licenses Are Issued in Indiana?

Indiana licenses mortgage brokers through the Office of the Secretary of State, though applications are processed through the Nationwide Mortgage Licensing System (NMLS). Don�t confuse a mortgage broker license with a mortgage lending license, which permits loan origination as well as mortgage brokering. Mortgage lending licenses are issued by the Indiana Department of Financial Institutions (DFI). Our focus here is on mortgage broker licenses.

There are two types of mortgage broker licenses in the state:

• Company – for sole proprietorships and companies representing residential clients
• Branch – for additional locations operated by a licensed mortgage broker

What Does the Licensing Process Involve?

The Indiana Loan Broker Act imposes a continuous education requirement on principal managers during their first year as licensed mortgage broker, but no exam is required before applying for a license. There is, however, a residency requirement and principal managers must have two years of relevant experience. All applicants for a mortgage broker license must purchase a surety bond and submit it through the NMLS website along with other required documents. Some paperwork must be sent directly to the Secretary of State’s office.

Why Is a Surety Bond Required?

A surety bond indemnifies the state against legal liability for any financial loss suffered by consumers as a result of the unlawful or unethical actions of a licensed Indiana mortgage broker. The surety bond is the licensee�s guarantee to abide by all relevant rules and regulations of the Indiana Loan Broker Act and other laws of the state of Indiana, all of which are spelled out in the terms of the surety bond agreement.

What Happens if a Claim is Filed?

In the event that a licensed mortgage broker acts in a manner that causes a financial loss to another party, the injured party has the right to file a claim for damages against the mortgage broker�s bond. The first thing the surety company will do is make sure the claim is valid. The usual practice is for the surety company to attempt to negotiate a settlement, but if that�s unsuccessful, the surety company will go ahead and pay the claim as an advance on the mortgage broker�s behalf.

However, every surety bond contract includes an indemnification clause that relieves the surety company of any financial responsibility for paying claims. Paying claims is the legal responsibility of the mortgage broker who purchased the bond. Consequently, the mortgage broker must reimburse the surety company in full.

What Does a Mortgage Broker Bond Cost?

Surety companies calculate bond premiums as a small percentage of the total required bond amount. In Indiana, the required bond amount depends on the previous year�s loan volume:

• $50,000 for a loan volume of up to $5 million
• $60,000 for a loan volume of $5 million to $20 million
• $75,000 for a loan volume over $20 million

The surety company assigns each applicant a premium rate based on the applicant�s personal credit score and financial condition. Applicants with good credit will pay between 1% and 3% of the required bond amount. Applicants with credit problems will likely pay a higher premium rate.

Get Bonded Today for Mortgage Broker Licensing Success

Apply online today for a mortgage broker bond that will allow you to get or renew your Indiana mortgage broker license.