Since 2009, the state of New York has adopted and re-adopted emergency regulations for the governance of mortgage loan servicers. The re-adopted rules require New York mortgage loan servicers to get a surety bond before becoming licensed.
Licensing for NY Mortgage Loan Servicers
The�Department of Financial Services (DFS) first adopted emergency regulations for New York mortgage loan servicers in 2009. The regulations—adopted on July 23, 2017—can be viewed in their entirety on the DFS website.
As in many other states, New York mortgage loan servicers’�applications are submitted through the Nationwide Multistate Licensing System (NMLS). Mortgage loan servicers must pay the following nonrefundable fees:
- $3,000 investigation fee
- $102.25 fingerprint processing fee per control person
- $500 fee per additional branch office
- $15 credit report fee per control person
- $100 NMLS processing fee
Upon initial application, New York mortgage loan servicers can apply for only two branch locations. Once received, complete applications are published in the DFS’s Weekly Bulletin, and those who submitted incomplete applications are notified in writing. Applicants must submit the missing information within 30 days, or their application is considered withdrawn. If a would-be servicer’s application is withdrawn, the applicant must submit a new application.
Mortgage loan servicers must provide a written statement promising to maintain a minimum adjusted new worth of $250 million plus one-quarter of one percent of the outstanding principal balance of aggregate mortgages serviced. The letter must be signed by a designated officer. Applicants are required to have errors & omissions insurance coverage of at least $300,000, and post a fidelity bond of at least $300,000 (in addition to the $250,000 surety bond).
The NMLS’s New York mortgage loan servicer application checklist contains a full list of information required for licensure—read it thoroughly before sending in your application. Don’t purchase the $250,000 surety bond until your application is approved.
What does this bond do?
New York mortgage loan servicer applicants are not required to purchase a surety bond until the application is approved. If a servicer were to become insolvent, go bankrupt, liquidate, or lose licensure, the surety bond would provide consumers a means of seeking reimbursement for fees and undisbursed payments. The bond would also pay any costs owed to the DFS after business closure or loss of licensure.
The surety bond must be at least $250,000 but the Superintendent of the DFS can require it to be double that�$500,000�at his or her discretion. A history of consumer complaints against a servicer can result in the surety bond increase. The DFS provides a bond form for applicants’ surety companies to use.
The $300,000 fidelity bond serves as protection against fraud, embezzlement, forgery, and similar employee theft�revisit our post on fidelity bonds vs. surety bonds to brush up on their differences.