How to Become a Mortgage Broker in California

Sep 3 Posted on

What Types of Broker Licenses Are Issued in California?

There are three different types of broker licenses in California:

  • The California Finance Lender or Broker License (CFL) issued by the California Department of Business Oversight (DBO) allows licensees to broker loans only with others holding a CFL.
  • The California Residential Mortgage Lender License (CRML), also issued by DBO, allows licensees to make and service residential loans in California and also to broker loans to other CRML lenders and to banks and credit unions if they hold a mortgage loan originator’s license in addition to a CRML.
  • The Real Estate Broker License issued by the Bureau of Real Estate (BRE) allows licensees to function as both mortgage brokers and real estate brokers in California.

What Does the Licensing Process Involve?

The licensing and application requirements, paperwork to be submitted, and licensing and processing fees differ for each type of license. For example, applicants for a license from DBO must meet certain personal net worth requirements, though the amounts are different for residential and non-residential lenders/brokers. There is no net worth requirement for obtaining a Real Estate Broker License from BRE.

Another major point of difference is the requirement to pass a broker examination, which only applies if obtaining a Real Estate Broker License. And while there is a surety bond requirement for getting a CFL or CRNL license, there is none for becoming licensed as a Real Estate Broker.

Why Is a Surety Bond Required?

Surety bonds are required for many state-granted licenses in a wide range of professions as a way to ensure that no innocent party suffers a financial loss as a result of the unlawful or unethical business practices of a licensee. The surety bond requirement for mortgage brokers in California ensures that bonded licensees comply with the California Residential Mortgage Lending Act, the California Finance Lenders Law, and other applicable statutes.

By purchasing the required surety bond, licensees are guaranteeing that they will comply with the law, honor their agreements with clients, and refrain from any unethical business practices. They enter into the surety bond agreement knowing that violating any of the terms of the bond can result in one or more claims being filed against the bond, which can end up costing them a great deal of money.

What Happens if a Claim is Filed?

When a claim is filed, the surety company will first investigate to make sure that it is valid. They typically advance compensation to those with valid claims, but they will then turn to the bonded individual to get reimbursed for the amount advanced. The surety company is indemnified by a clause included in every surety bond contract, making the licensee solely responsible for paying claims.

What Does a Mortgage Broker Bond Cost?

Applicants for a mortgage broker license bond will pay a premium that is a small percentage of the required bond amount�typically between one and three percent for applicants with good credit. Those with poor personal credit will pay a substantially higher premium rate.

Secure Your Surety Bond Today and Get Licensed as a Mortgage Broker

Call us today to get a quote on the mortgage broker bond you need in order to become licensed as a California mortgage lender or broker.

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How to Become a Mortgage Broker in Arizona

Sep 3 Posted on

What Types of Mortgage Broker Licenses Are Issued in Arizona?

Arizona issues mortgage broker licenses that allow licensees to broker loans on both commercial and residential properties. Mortgage broker licenses are issued to both individuals and companies that find, compare, and negotiate loans for real estate purchases within the state of Arizona. Those who deal with commercial real estate clients should apply for a Commercial Mortgage Broker license.

There are three types of Arizona mortgage broker licenses: company, branch, and individual.

What Does the Licensing Process Involve?

In Arizona, mortgage brokers are licensed at the state level by the Arizona Department of Financial Institutions (AzDFI). Applications are processed through the Nationwide Mortgage Licensing System (NMLS), but hard copies of the documents required to support the application are mailed directly to AzDFI.

Applicants for licensing as a mortgage broker must meet experiential and residency requirements, complete 24 hours of pre-licensing education, and pass both a school exam and a state exam. The AzDFI application fee and NMLS processing fees are both collected through NMLS. There are also fees for taking the required class and taking the required exams.

Applicants who have completed the educational requirements and are ready to proceed with licensing must purchase a Mortgage Broker surety bond. The required bond amount depends on whether the applicant will be working with only institutional investors ($10,000) or with both institutional and non-institutional investors ($15,000).

Why Is a Surety Bond Required?

States require surety bonds before issuing licenses for individuals or companies in professions that have the potential to result in financial loss for clients if those professionals engage in unlawful or unethical conduct. Arizona�s surety bond requirement for mortgage brokers obligates those licensees to comply with all applicable state laws as well as the rules and regulations of AzDFI.

A mortgage broker surety bond is a licensee�s guarantee to abide by the law and behave ethically and responsibly in all of their dealings with clients and investors, as spelled out in the terms and conditions of the surety bond agreement. Any violation can result in a claim being filed against the surety bond�claims for which the licensee is legally responsible for paying.

What Happens if a Claim is Filed?

First, understand that a surety bond brings together three parties in a legally binding agreement:

  • The obligee is the state agency requiring the bond, in this case, AzDFI.
  • The principal is the party applying for a mortgage broker license and required to purchase the bond.
  • The surety is the company underwriting and issuing the bond.

When a claim is filed, the surety will first conduct an investigation to ascertain its validity. If the claim is valid, the surety will typically attempt to negotiate a settlement. If that is unsuccessful, the surety will pay the claim, but only as an advance that the principal must then reimburse. Remember, it�s the principal, not the surety, that is legally responsible for paying claims.

What Does a Mortgage Broker Bond Cost?

As with all surety bonds, the premium you will pay is only a small percentage of the total required bond amount. The surety decides what that percentage, the premium rate, will be based on the applicant�s personal credit and financial situation. The better the applicant�s credit, the lower the premium rate will be. Those with good credit will pay the standard market rate of between 1% and 3% of the total bond amount, while those with poor credit will pay a higher rate.

Secure Your Surety Bond Today and Get Licensed as a Mortgage Broker

Let the surety experts at Single Source Insurance help you get the bond you need to secure your Arizona mortgage broker license.

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