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.
Costs of Becoming a Licensed Mortgage Broker in Texas
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.