Massachusetts Surety Bonds

If you haven’t obtained one yet, you are now overdue in complying with Massachusetts’ requirement that all mortgage lenders and brokers have a surety bond (you should have had it by December 31, 2008). If you are applying for a new license, the surety bond is part of your application.

The amount of the bond is different for lenders and brokers but for lenders, it is based on your volume of business in Massachusetts. If you are a lender, and the volume of the loans you have closed is reported on your Annual Report for the previous year as between $0-$49,999,999, then you must have the minimum bond of $100,000. If your closed loan volume is between $50,000,000 and $249,999,999, then your bond must be in the amount of $250,000. If you closed loans with a dollar volume of $250,000,000 or more, then you need a $500,000 surety bond.

For mortgage brokers, the amount of the bond is $75,000, regardless of how many Massachusetts loans you brokered in the previous year.

Those licensees who hold both a lender and a broker license need two bonds, a lender bond in the amount that corresponds to its closed loan volume and a $75,000 broker bond.

Both lenders and brokers will be required to submit Continuation Certificates each year to confirm that the surety bond is in effect and that it is in the proper amount.

New Massachusetts Licensing Requirements

There are more new regulations that have taken effect in Massachusetts as of September 7, 2007.

All mortgage lender and mortgage broker license applicants now submitting applications must comply with new net worth and surety bond requirements. Mortgage broker applicants must submit recent financial statements that have been audited or reviewed by a certified public accountant with their application. Additionally, the Division of Banks requires mortgage lenders to maintain a net worth of not less than $200,000. The net worth requirement must be proved by the submission of company financial statements, at the time of initial application and on an annual basis, which have been audited in accordance with generally accepted auditing principals (GAAP) by an independent certified public accountant. The Division of Banks requires mortgage brokers to maintain a net worth of not less than $25,000 and mortgage brokers must submit company financial statements, at the time of initial application and on an annual basis, which have been audited or reviewed by an independent certified public accountant.

There are also new surety bond requirements that are now in effect. Mortgage lenders must maintain a surety bond in a sum to be based on the amount of the Applicant's aggregate mortgage loans, as determined by the Division of Banks, but in no event shall the sum of the bond be less than $100,000, up to a maximum of $500,000. Mortgage brokers must maintain a bond of $75,000.

Changes to Massachusetts Licensing Regulations

Massachusetts' regulations regarding industry experience have changed.

Previously, there was no explicit standard about industry experience requirements. The Division of Banks evaluated each applicant's experience and decided whether the applicant could be trusted to comply with state and federal statutes and regulations concerning the mortgage process.

Now, mortgage brokers must show 3 years of full-time or the equivalent in part-time mortgage industry experience. The experience can be gained by working as a mortgage broker in another state, or working for another mortgage broker or lender or bank in Massachusetts. You don't get any credit for working for an unlicensed broker or in an unlicensed branch office.

An applicant for a mortgage lender license must show 5 years of full-time mortgage industry experience, likewise gained by working as a mortgage broker in another state, or working for another mortgage broker or lender or bank in Massachusetts.

Branch managers must show 3 years of full-time mortgage industry experience.