Surety bonds

Most of the states require surety bonds as part of the licensing process. What is a surety bond? A surety bond is a contract with an insurance underwriter, which ensures that the Banking Departments can collect unpaid fees from the licensee.

The surety bond requirement varies from state to state. It can range from $10,000 for a New York mortgage broker license to $150,000 for a New Jersey 1st and 2nd mortgage broker license. Mortgage lenders tend to have higher requirements than mortgage brokers although some states don't require the surety bond at all because they require higher net worths or proof of a certain dollar amount in the bank.

From where do you get a surety bond? I use a company that specializes in surety bonds for the mortgage industry. There are a few out there. I like the fact that they know what the requirements are for each state and what form of surety bond each state requires. That saves me a lot of time. If you go to the insurance agent who sold you your business insurance, he will probably ask you for a copy of the surety bond language. It is available on the banking department web site.

Most insurance companies require you to complete an application and for you to submit both company and personal financial statements. And they will pull the credit reports of the owners to ensure that you are a good credit risk. Because you are taking most of the risk. Most underwriters require a personal indemnity from the owners of the mortgage company.

It can take a few weeks to several weeks to get the surety bond so don't wait until the last minute to get yours. It will hold up the application process.