A good mortgage bond definition starts by saying that it is a special kind of surety bond which, like most sureties, protects the clients involved in the business transaction, rather than the person buying the surety. As a mortgage agent/broker, your clients would be fully protected in case you were to sell real estate to individuals who ultimately were unable to pay off their mortgage, and defaulted. Another element of the mortgage bond definition stipulates that if you break any rules listed in the details of the mortgage broker bond, you could be held liable for any claim made against the bond by investors or purchasers.
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For a broker to obtain a broker bond, an indemnity agreement must be signed which commits you to pay up to the full amount of the bond itself if any claims are levied against you. Since this is a legal and binding contract, the state in which a bond is issued would find you liable for any part of, or the entire amount, of that bond. If you intend to do business as a mortgage agent in multiple states, you would need to secure a bond in each of the states you intend to do business in since laws vary across state borders. As long as you, the broker, do not cause the conditions which have prompted an investor to claim your bond, you should be relatively safe from being found liable. However, if you knowingly create a situation that leads someone to claim the mortgage surety bond, that is more likely to fall into your lap, and cost you a significant amount of money. We only work with top bonding companies.
MORTGAGE BROKER BOND
How to Obtain a Mortgage Broker Bond
There are a lot of great resources to learn how much they cost. At the end of the day, it’s easier to contact us to learn about bonding requirements and your options. We are licensed to write bonds nationwide. Let us help your business get properly bonded; contact us now.
Why Mortgage Broker Bonds Are Important
Another component of the mortgage bond definition should address its importance: almost all states in the country require you to have one, and you cannot conduct real estate business professionally without one. Secondly, they protect your real estate purchasing clients from losing their hard-earned money, if, through any fault of yours, a real estate transaction falls through or fails to be concluded as expected. If you did not have a bond, there would be few clients who would have enough faith or confidence in you to choose you as their preferred broker.
With the bond in place though, a customer can at least have the confidence that comes from knowing that they can salvage some portion of their investment by claiming your bond. In essence, having a broker bond puts you on a level playing field with all other brokers who have one as well – if you lacked mortgage broker surety bonds, and most of your rivals did have one, you would find yourself at a distinct competitive advantage.
How a Mortgage Broker Bond
The first thing you need to do when trying to obtain a bond is to check out the precise requirements imposed by your state. Some states require that you have a unique mortgage broker surety bond with each of the lending institutions you do business with, and sometimes at each branch location you have.
You may also need to pass a qualifications test, which gauges your understanding and knowledge of real estate concepts and transactions. Many states also require applicants to take a pre-licensing education course, to be sure that candidates are thoroughly familiar with real estate subject matter. Another possible stipulation is that you purchase Errors & Omissions insurance, which is something like malpractice insurance would be for people in the medical profession.
Having satisfied all the state and local requirements for obtaining a mortgage broker license bond, you would then be free to officially apply for a bond at a bond or surety company of your choosing. For instance, the largest writer of sureties in the U.S. – NFP – would be a trusted and reliable company for you to apply with, and receive a prompt response.
You, as principal, would need to pay some percentage of the face value of the bond, but not the entire amount listed on it. The surety company issuing it would be responsible for the full face value of the business bond if you caused some condition that led to a claim against it. However, the surety company would then be entitled to come after you to recover any monies lost in that claim.
Assuming you are approved for bonding, it would be sent to you in the mail, after which you would sign it, make a copy, and then send the signed copy to the appropriate state agency. When the state receives your bond, you would then be issued a state license to conduct business as a mortgage agent/broker, generally within three weeks from the time you sent it to the state agency.
Contact us today to learn more about what we do, as well as how to obtain the proper surety (and limits). Our experienced team is standing by. We can help you out in any state. Learn more about corporate surety bonds. We hope this helps clarify ‘what is a mortgage bond?’, and we look forward to earning your trust.