Mortgage Broker Bond

Before anyone can enter the real estate industry, they must buy a mortgage broker bond. The Nationwide Multistate Licensing System & Registry (NMLS) requires this bond for all mortgage brokers in their state to make sure they are living up to their professional obligations. If any individuals are harmed by broker misconduct, they can file a claim on the mortgage broker bond. Then, if the claim is accepted, the mortgage broker’s surety company would compensate the client for any losses and the broker would need to repay the surety for additional charges. 

Some examples where a mortgage broker can break their moral obligations include:

  1. Failure to pay any legally-required fees, such as payments from court 
  2. Approving any loans for a client when they know that they cannot fully repay the amount
  3. Using another person’s private information to obtain a mortgage
Mortgage Broker Bond Form (DE)
Mortgage Broker Bond Form (DE)

How much does a Mortgage Broker Bond Cost?

A mortgage broker bond’s cost depends on several factors, such as which state you are living in. Generally, the price for a Mortgage Broker Bond relies on the percentage of the total bond amount. (Ex. If the bond amount is $10,000 and the cost is %1, the total cost of the bond would be $100.) 

Usually, a bond would cost between 1-4% of the bond amount. Each state sets its own bond amount for mortgage brokers. See our in depth mortgage broker bond guide where we cover bond amounts for the major states. One you’ve determined your bond amount, the percentage of the bond cost would vary depending on some components, such as the broker’s financial background, mainly their credit score and track record. Brokers with higher credit scores and a strong track record will likely have lower bond rates than a broker with lower credit scores and a weak track record.One last thing to note is how some states have a higher rate for bond cost than others, which can affect the total pricing of the mortgage broker bond.


Mortgage Broker Bond FAQs

How Does a Mortgage Broker Bond Really Work? 

A mortgage broker bond is a three-way insurance agreement between the surety company, mortgage broker, and broker’s clients. Mortgage brokers are required to have the mortgage broker bond if they wish to be licensed. This bond is to safeguard any consumers from any violations from the brokers. If a mortgage broker does not fulfill their services, the customer can file a claim against the broker through this bond. If the claim is officially approved, the broker’s surety agency will pay the client the broker’s damages based on the bond amount. Additionally, the broker would need to reimburse the surety company for any payment. 

Who Needs a Mortgage Broker Bond?

Mortgage brokers looking to kick-start their careers would need this bond. The mortgage broker bond is a crucial part of the licensing process for the brokers. All licensed mortgage brokers must have this bond when officially working, except in Florida, where they removed the need to buy surety bonds due to recent changes from the Florida Mortgage Brokerage and Mortgage Lending Act (Chapter 494).

Also, you are generally required to have the mortgage broker bond as long as you are renewing your mortgage broker license. Without this bond, you can receive fines and even get your license revoked. 

How Can I Become a Mortgage Broker? 

To become a mortgage broker, there are prerequisites you need before applying. All mortgage brokers are required to have at least a high school diploma or GED. Once obtaining one of these certificates, you need to apply for licensing. The Secure and Fair Enforcing Licensing Act requires all brokers to have a license.

The licensing process requires you to pass the NMLS Mortgage License exam. It is highly encouraged to complete at least 20 hours of a pre-license class that covers topics on federal and state mortgage laws, which will teach you important information for the job. After you pass, you'll have to meet extra conditions specific to the state where you want to get your license. Each state varies in other additional requirements to receive your license, such as background information and posting a surety bond. For example, in Illinois, you must buy a mortgage broker bond and give more details about your criminal record check and credit report during the licensing process. Once all specific requirements are met in your state, you will receive your license and become a mortgage broker! 

It is important to note that you will need to continue renewing your license if you continue working as a mortgage broker. There are several ways to do so, such as continuing to take education courses and staying up to date with any regulations related to your state. 

How Do I Purchase a Mortgage Broker Bond?   

To obtain a mortgage broker bond, you have the option of enrolling with a broker like SuretyNow. You will receive an online application that will ask you for your personal information, such as financial background and credit history. Once the application is complete, the surety agency will send it to the company that issues the bond. This type of firm is known as a carrier.

The carrier then goes through an evaluation process known as underwriting where they determine if your mortgage bond is eligible or not. They may ask for more documents to be filled if needed.  

Within a few days, the insurance agency will contact you to pay for the mortgage bond. Once payment is complete, you will receive the bond digitally through email.

Please note that mortgage broker bonds expire after every 12 months, so it is important that you renew it yearly by completing the same process described above. We've helped many mortgage brokers get their bonds. Get in touch with us if you need any help!

Who is Eligible for a Mortgage Broker Bond? 

Generally, any mortgage brokers that are entering the real estate business are eligible for this bond. The law requires that mortgage professionals have this bond for most states, except areas like Florida.