A mortgage bond, in regards to surety, is a type of license and permit surety bond required by a state agency for licensure pertaining to mortgage activities.
This is not to be confused with mortgage bonds that are also known as mortgage backed security bonds.
There are a number of different types of mortgage bonds for surety which vary based on state statutes.
Some states only have one license type and therefore only have a single bond. Other states have very detailed license types and, therefore, have multiple bonds. The SAFE Mortgage Licensing Act of 2008 has created minimum standards that every state has adopted.
Popular Types of Mortgage Bonds
- Mortgage Originator Bonds
- Mortgage Loan Originator Bonds
- Mortgage Loan Originator Blanket Bonds
- Mortgage Company Bonds
- Mortgage Banker Bonds
- Mortgage Servicer Bonds
- Mortgage Lender Bonds
Bonds are required before a license can be issued to you. For example, a mortgage broker bond is required before a mortgage broker license can be legally issued. To be able to legally conduct your business, you will need to obtain the proper mortage surety bond.
In some cases, you might need more than one mortgage bond. For example, depending on your state’s requirements, mortgage loan originators might need to secure an individual mortgage loan originator surety bond in addition to the mortgage broker bond that their company holds.
How Do Mortgage Bonds Work?
Mortgage bonds are a contract that promise you will honestly and ethically fulfill your duties. If you fail to do so, someone can make a claim against your surety bond.
Unlike insurance claims which are paid by an insurance company, mortgage claims must be paid by you. The surety company will pay the claim first, then come to you for reimbursement. You are responsibile for every penny paid out on a bond claim.
Cost of Mortgage Bonds
As with all surety bonds, mortgage professionals do not need to pay the entire bond amount. Rather, they will just pay a portion of the bond amount to secure their bond.
Mortgage bonds range in bond amount, therefore it is impossible to say what you might pay for a mortgage bond. Some mortgage bonds are issued for as low as $100, while others cost more.
The range in premium is largely dependent on your personal and business credit history.
The best way to see what you'd pay for a mortgage bond is to get a free quote.
Why are Mortgage Bonds Important?
Mortgage bonds are not only essential to you, they are also essential to your clients. Mortgage bonds serve an important purpose of protecting your clients. If you break the law or any other rules while operating as a mortgage lender, broker, or servicer, and you have a bond, your clients can file a claim against your bond.
If you are found guilty of the claim, your clients are protected by the bond and ‘made whole’ by the surety company. It is then your duty to reimburse the surety company for the payment they made to your client.
Mortgage bonds also protect the mortgage industry. They make sure state licensing agencies are protected if claims are made. An example of this is the financial meltdown of 2008. Many clients and state licensing agencies were financially injured during this crisis. Luckily, they had bonds, and the surety companies that issued those bonds had to abide by the bond agreement and compensate for the losses.