Connecticut Mortgage Correspondent Lender Bond: A Comprehensive Guide
April 7, 2021
This guide provides information for insurance agents to help mortgage correspondent lenders obtain Connecticut Mortgage Correspondent Lender Bonds
At a Glance:
- Average Cost: Between 0.75% to 5% of the bond amount per year based on the lender’s credit
- Bond Amount: Between $100,000 to $500,000 (more on this later)
- Who Needs it: All mortgage correspondent lenders seeking to obtain a license in the State of Connecticut
- Purpose: To ensure the public will receive compensation for any damages should the mortgage correspondent lender fail to comply with licensing law
- Who Regulates Mortgage Correspondent Lenders in Connecticut: The Connecticut Department of Banking
Background
Connecticut Statute 36a-486 requires all mortgage correspondent lenders operating in the state to obtain a license with the Department of Banking. The Connecticut legislature enacted the licensing laws and regulations to ensure that mortgage correspondent lenders engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, mortgage correspondent lenders must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Connecticut Mortgage Correspondent Lender Bond?
Connecticut requires mortgage correspondent lenders to purchase a surety bond as part of the application process to obtain a business license. The bond ensures that the public will receive compensation for financial harm if the lender fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the lender breaks licensing laws.
How Can an Insurance Agent Obtain a Connecticut Mortgage Correspondent Lender Surety Bond?
BondExchange makes obtaining a Connecticut Mortgage Correspondent Lender Bond easy. Simply login to your account and use our keyword search to find the “mortgage” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.
At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.
How is the Bond Amount Determined?
The limit on the Connecticut Mortgage Correspondent Lender Bond is determined by the dollar amount of loans originated between July 1 to June 31 of the preceding financial year. The below table illustrates the required limits on the Connecticut Mortgage Correspondent Lender Bond:
| Dollar Amount of Loand Originated | Bond Amount |
|---|---|
| Less than $30 million | $100,000 |
| $30 million but less than $100 million | $200,000 |
| $100 million but less than $250 million | $300,000 |
| $250 million or more | $500,000 |
Is a Credit Check Required for the Connecticut Mortgage Correspondent Lender Bond?
Surety companies will run a credit check on the mortgage correspondent lender to determine eligibility and pricing for the Connecticut Mortgage Correspondent Lender bond. Lender’s with excellent credit and work experience can expect to receive the best rates. Lender’s with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the lender’s credit.
How Much Does the Connecticut Mortgage Correspondent Lender Bond Cost?
The Connecticut Mortgage Correspondent Lender surety bond can cost anywhere between 0.75% to 5% of the bond amount per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the approximate bond cost on a $100,000 bond requirement.
$100,000 Mortgage Correspondent Lender Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $750 |
| 650 – 699 | $1,000 |
| 625 – 649 | $1,250 |
| 600 – 624 | $1,500 |
| 550 – 599 | $3,000 |
| 500 – 549 | $5,000 |
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.
How Does Connecticut Define “Mortgage Correspondent Lender?”
To paraphrase Connecticut Statute 36a-485, a mortgage correspondent lender is any individual or business entity who makes residential mortgage loans in their own name, where the loans are not held by the lender for more than 90 days, and are funded by another person through a warehouse agreement, table funding agreement etc.
How do Mortgage Correspondent Lenders Apply for a License in Connecticut?
Mortgage Correspondent Lenders in Connecticut must navigate several steps to secure their license. Below are the general guidelines, but license applicants should refer to the NMLS’s application guidelines for details on the process.
License Period – The Connecticut Mortgage Correspondent Lender License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Meet the Net Worth Requirements
Applicants for the Connecticut Mortgage Correspondent Lender License must first amass a tangible net worth (assets – liabilities) of at least $50,000. Lenders must submit a completed financial statement verifying their net worth when submitting their license application.
Step 2 – Hire a Qualifying Individual
Mortgage correspondent lenders must employ a qualifying individual who is responsible for running the day to day operations of the lending company. Qualifying individuals are subject to both background and credit checks, and must satisfy the following criteria:
-
- Be licensed as a mortgage loan originator with Connecticut
- Hold physical employment at the main office location
- Have at least three years of experience in the mortgage business, within the five years immediately preceding the application
- Reside within 100 miles of the main office or show capability of full time supervision
Qualifying individuals must submit a work experience form verifying their experience.
Step 3 – Purchase a Surety Bond
Mortgage correspondent lenders must purchase and maintain a surety bond (limits outlined in the previous section)
Step 4 – Request a NMLS Account
The Connecticut Mortgage Correspondent Lender License application is submitted electronically through the Nationwide Multistate Licensing System (NMLS). To submit a license application, applicants must first request to obtain an NMLS account.
Step 5 – Complete the Application
All Connecticut Mortgage Correspondent Lender applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
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- Financial statements indicating a tangible net worth of at least $50,000
- The following company contacts:
- Primary Company Contact
- Accounting
- Exam Billing
- Licensing
- Consumer Complaint (Public)
- Exam Delivery
- Litigation
- Consumer Complaint (Regulator)
- Legal
- Pre-Exam Contact
- Company formation documents
Mortgage correspondent lenders must pay the following fees when submitting their license application
-
- $1,000 registration fee
- $100 NMLS processing fee
- $36.25 background check fee (per person)
- $15 credit report fee (per person)
How Do Connecticut Mortgage Correspondent Lenders Renew Their License?
Mortgage Correspondent Lenders can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Connecticut Mortgage Correspondent Lender License expires on December 31 of each year and must be renewed before the expiration date
What Are the Insurance Requirements for the Connecticut Mortgage Correspondent Lender License?
The State of Connecticut does not require mortgage correspondent lenders to obtain any form of liability insurance as a prerequisite to obtaining a business license. Mortgage correspondent lenders must purchase and maintain a surety bond (limits outlined in the previous section).
How Do Connecticut Mortgage Correspondent Lenders File Their Bond?
Mortgage Correspondent Lenders should submit the completed bond form, including the power of attorney, electronically through the NMLS. Additionally, lenders must mail their completed bond form to the following address:
Department of Banking
260 Constitution Plaza
Hartford CT 06103-1800
The mortgage correspondent lender surety bond requires signatures from both the surety company that issues the bond and a representative from the lending company. The surety company should include the following information on the bond form:
- Legal name and state/county of entity/individual(s) buying the bond
- Surety company’s name and state/county
- License type (mortgage correspondent lender)
- Date the bond is signed
- Witness signatures for both the principal and surety company
What Can Connecticut Mortgage Correspondent Lenders Do to Avoid Claims Against Their Bond?
In order to avoid claims made against their bond, mortgage correspondent lenders in Connecticut must follow all license regulations in the state. Including some of the most important issues below that tend to cause claims:
- Faithfully account for all funds received from borrowers
- Honor all written agreements made with borrowers
What Other Insurance Products Can Agents Offer Mortgage Correspondent Lenders in Connecticut?
Connecticut does not require mortgage correspondent lenders to purchase any form of liability insurance as a prerequisite to obtaining a license. However, most reputable lenders will seek to obtain this insurance anyway. Bonds are our only business at BondExchange, so we do not issue liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
How Can Insurance Agents Prospect for Connecticut Mortgage Correspondent Lender Customers?
The NMLS conveniently provides a public database to search for active mortgage correspondent lenders in Connecticut. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
