Kentucky Mortgage Company Bond: A Comprehensive Guide
May 19, 2021
This guide provides information for insurance agents to help mortgage companies obtain Kentucky Mortgage Company Bonds
At a Glance:
- Average Cost: Between $1,875 to $12,500 per year based on the applicant’s credit
- Bond Amount: $250,000
- Who Needs it: All mortgage loan companies operating in Kentucky
- Purpose: To ensure the public will receive compensation for any damages should the mortgage loan company fail to comply with licensing law
- Who Regulates Mortgage Companies in Kentucky: The Kentucky Department of Financial Institutions
Background
Kentucky statute 286.8-030 requires all mortgage companies operating in the state to obtain a license with the Department of Financial Institutions. The Kentucky legislature enacted the licensing laws and regulations to ensure that mortgage companies engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, mortgage companies must purchase and maintain a $250,000 surety bond to be eligible for licensure.
What is the Purpose of the Kentucky Mortgage Company Bond?
Kentucky requires mortgage companies 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 mortgage company fails to comply with the licensing regulations set forth in Kentucky statute 286.8. Specifically, the bond protects the public in the event the mortgage company engages in any acts of fraud or fails to honor any agreements made with consumers. In short, the bond is a type of insurance that protects the public if the mortgage company breaks licensing laws.
How Can an Insurance Agent Obtain a Kentucky Mortgage Company Surety Bond?
BondExchange makes obtaining a Kentucky Mortgage Company 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.
Is a Credit Check Required for the Kentucky Mortgage Company Bond?
Surety companies will run a credit check on the owners of the mortgage loan company to determine eligibility and pricing for the Kentucky Mortgage Company bond. Owner’s with excellent credit and work experience can expect to receive the best rates. Owners 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 owner’s credit.
How Much Does the Kentucky Mortgage Company Bond Cost?
The Kentucky Mortgage Company surety bond can cost anywhere between $1,875 to $12,500 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 the $250,000 bond requirement.
$50,000 Mortgage Broker Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $1,875 |
| 650 – 699 | $2,500 |
| 625 – 649 | $3,125 |
| 600 – 624 | $4,700 |
| 550 – 599 | $10,000 |
| 450 – 549 | $12,500 |
*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 Kentucky Define “Mortgage Company?”
Kentucky statute 286.8-010 defines a mortgage company as any business entity who makes, purchases, sells, services mortgage loans.
How do Mortgage Companies Apply for a License in Kentucky?
Mortgage companies in Kentucky must navigate several steps to secure their license. Below are the general guidelines, but applicants should refer to the NMLS’s application guidelines for details on the process.
License Period – The Kentucky Mortgage Company License expires on November 30 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Mortgage companies must purchase and maintain a $250,000 surety bond
Step 2 – Request a NMLS Account
The Kentucky Mortgage Company 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 3 – Complete the Application
All Kentucky Mortgage Company License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Audited company financial statements prepared by a CPA
- Certificate of Good Standing obtained from the Kentucky Secretary of State
- Company formation documents
- Organizational chart detailing the company’s ownership structure
- Personal financial statements for each individual with at least a 10% ownership interest in the company
Mortgage companies must pay an $850 licensing fee when submitting their application
How Do Kentucky Mortgage Companies Renew Their License?
Mortgage companies can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Kentucky Mortgage Company License expires on November 30 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Kentucky Mortgage Company License?
The State of Kentucky does not require mortgage companies to obtain any form of liability insurance as a prerequisite to obtaining a business license. Mortgage companies must purchase and maintain a $250,000 surety bond.
How Do Kentucky Mortgage Companies File Their Bond?
Mortgage companies should submit the completed bond form, including the power of attorney, electronically through the NMLS. The surety bond requires signatures from both the surety company that issues the bond and a representative from the mortgage company. The surety company should include the following information on the bond form:
- Legal name and address of entity/individual(s) buying the bond
- Surety company’s name and address
- Date the bond goes into effect
- Date the bond is signed
What Can Kentucky Mortgage Companies Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, mortgage companies in Kentucky must follow all license regulations in the state, including some of the most important issues below that tend to cause claims:
- Do not engage in any acts of fraud
- Pay all required taxes and fees
- Honor all agreements made with consumers
What Other Insurance Products Can Agents Offer Mortgage Companies in Kentucky?
Kentucky does not require mortgage companies to purchase any form of liability insurance as a prerequisite to obtaining a license. However, most reputable businesses 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 Kentucky Mortgage Company Customers?
The NMLS conveniently provides a public database to search for active mortgage companies in Kentucky. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
