Mortgage Broker
Federal Law requires businesses in some industries to obtain a surety bond before a state business license is issued. Before getting their mortgage broker license a Mortgage lenders and brokers is required to get a surety bond, a process that is generally backed by the state department of banking. The purpose off the bond is to ensure the consumer is protected in the event of unlawful practices or fraud on the part of the broker or lender.
Potential clients are much more likely to hire a licensed and bonded business because they understand that bonds provide an additional layer of protection.
Mortgage lender bonds protect customers against dishonest lending practices, including:
• Knowingly approving the borrower for a loan for more than they can afford to repay
• Encouraging the buyer to use fraud during the application process
• Pressuring buyers into specific loan products, including high-risk loans or loans with higher interest rates
• Establishing an interest rate on the basis of anything other than the borrower’s credit history
• Charging additional or unnecessary fees
• Deliberately targeting at-risk buyers and suggesting cash-out refinance
The bond's amount depends on the average amount of mortgage loan volume serviced in a year and the state in which business is done. The minimum bond amount is generally between $10,000 and $50,000.
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