What You Need To Know About A Mortgage Broker Surety Bond
A surety bond is a product that's designed to ensure one party (typically a business or individual in a certain sector) fulfills their contractual obligations. The party that purchases the surety bond is known as the principal and the obligee is the party that requires purchase of the bond. Usually, some type of government agency (like a local government or a regulatory agency) is the entity that demands purchase of the surety bond.
There are different types of surety bonds for various sectors. One type of bond is the mortgage broker surety bond. Keep reading to learn everything you need to know about this type of surety bond.
The Mortgage Broker Bond is for Individuals Who Broker Mortgage Loans
Like the name suggests, the mortgage broker bond is a surety bond for individuals who help consumers find loans that fit their lending needs. The mortgage broker will collect information from the borrower and then connect them with banks or lenders who have products that suit their personal financial situation and borrowing preferences.
If the mortgage broker causes financial harm to the borrower, the borrower can make a claim against the mortgage broker surety bond to receive financial compensation for their losses. For example, if the mortgage broker is intentionally deceptive when suggesting potential loans to the borrower, this can increase the cost of the mortgage for the borrower.
They may be able to receive compensation for these costs by making a claim on the surety bond. If the claim is successful, the mortgage broker must repay the company that issue their surety bond for the amount issued to the borrower.
The Cost for a Mortgage Broker Bond Varies from Broker to Broker
If you're a mortgage broker, you'll need to purchase your own mortgage broker surety bond. You can purchase a mortgage broker bond in person with a company that issues surety bonds or by applying online for the bond. The cost of the bond depends on a few different factors.
One of the most important details is the amount of the bond that you have to purchase. This detail is dictated by the state that you live in, as each state has their own requirements regarding surety bond amounts. The cost of the mortgage surety bond is equal to a percentage of the bond that you purchase.
Details surround your personal finances also affect the cost of your bond. The company issuing the surety bond will review your credit history and credit score when deciding whether to issue the bond and how much to charge you for the bond. If you have poor credit, you'll pay more for the the bond than a principal with stellar credit.
Contact a company, like NFP, P & C, Inc., to learn more.
