Louisiana Mortgage Loan Originator Bond: A Comprehensive Guide
May 21, 2021
This guide provides information for insurance agents to help their customers obtain Louisiana Mortgage Loan Originator Bonds
At a Glance:
- Average Cost: Between 0.5% to 5% of the bond amount per year based on the applicant’s credit
- Bond Amount: Based on the volume of loans originated in the previous calendar year:
| Loan Volume | Bond Amount |
|---|---|
| Less than $100 million | $25,000 |
| $100 million or more | $50,000 |
- Who Needs it: All Louisiana Mortgage Loan Originators (MLOs) who are not covered under their employers surety bond
- Purpose: To ensure the public will receive compensation for any damages should the mortgage loan originator fail to comply with licensing law
- Who Regulates Mortgage Loan Originators in Louisiana: The Louisiana Office of Financial Institutions
Background
Louisiana statute 1086 requires all mortgage loan originators operating in the state to obtain a license with the Office of Financial Institutions. The Louisiana legislature enacted the licensing laws and regulations to ensure that mortgage loan originators engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, mortgage loan originators who are not covered under their employer’s surety bond must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Louisiana Mortgage Loan Originator Bond?
Louisiana requires mortgage loan originators who are not covered under their employer’s surety bond 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 loan originator fails to comply with the licensing regulations set forth in the Louisiana Secure and Fair Enforcement of Mortgage Licensing Act of 2009. Specifically, the bond protects the public in the event the mortgage loan originator engages in any acts of fraud or fails to honor any agreements made. In short, the bond is a type of insurance that protects the public if the mortgage loan originator breaks licensing laws.
How Can an Insurance Agent Obtain a Louisiana Mortgage Loan Originator Surety Bond?
BondExchange makes obtaining a Louisiana Mortgage Loan Originator 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.
Are all Mortgage Loan Originators Required to Purchase a Surety Bond?
No, only mortgage loan originators who are not covered under their employer’s surety bond must purchase a bond. MLOs should check with their employer whether or not they are covered prior to purchasing a bond.
Is a Credit Check Required for the Louisiana Mortgage Loan Originator Bond?
Surety companies will run a credit check on the mortgage loan originator to determine eligibility and pricing for the Louisiana Mortgage Loan Originator bond. MLOs with excellent credit and work experience can expect to receive the best rates. MLOs 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 MLO’s credit.
How Much Does the Louisiana Mortgage Loan Originator Bond Cost?
The Louisiana Mortgage Loan Originator surety bond can cost anywhere between 0.5% 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 $25,000 bond requirement.
$25,000 Mortgage Loan Originator Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $125 |
| 650 – 699 | $250 |
| 625 – 649 | $313 |
| 600 – 624 | $470 |
| 550 – 599 | $1,000 |
| 500 – 549 | $1,250 |
*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 Louisiana Define “Mortgage Loan Originator?”
Louisiana statute 1083 defines a mortgage loan originator as any individual who takes a residential mortgage loan application or negotiates the terms of a residential mortgage loan.
How do Mortgage Loan Originators Apply for a License in Louisiana?
Mortgage Loan Originators in Louisiana 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 Louisiana Mortgage Loan Originator License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Request a NMLS Account
The Louisiana Mortgage Loan Originator 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 2 – Complete the Education Requirements
Applicants for the Mortgage Loan Originator License must complete 20 hours of pre-licensure education. The course provider must be approved by the NMLS.
Step 3 – Pass the Exam
After completing the required pre-licensure training, MLOs must pass a licensing exam administered by the NMLS
Step 4 – Purchase a Surety Bond
MLOs who are not covered under their employer’s surety bond must purchase and maintain a surety bond with a limit based on the volume of loans originated in the previous calendar year:
| Loan Volume | Bond Amount |
|---|---|
| Less than $100 million | $25,000 |
| $100 million or more | $50,000 |
Step 5 – Complete the Application
All Louisiana Mortgage Loan Originator License applications can be completed online through the NMLS. Applicants must complete the entire application, and pay the following fees:
-
- $230 application fee
- $36.25 background check fee
- $15 credit report fee
How Do Louisiana Mortgage Loan Originators Renew Their License?
Mortgage loan originators can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Louisiana Mortgage Loan Originator License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Louisiana Mortgage Loan Originator License?
The State of Louisiana does not require mortgage loan originators to obtain any form of liability insurance as a prerequisite to obtaining a business license. MLOs who are not covered under their employer’s surety bond must purchase and maintain a surety bond with a limit based on the volume of loans originated in the previous calendar year:
| Loan Volume | Bond Amount |
|---|---|
| Less than $100 million | $25,000 |
| $100 million or more | $50,000 |
How Do Louisiana Mortgage Loan Originators File Their Bond?
Mortgage Loan Originators 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 the mortgage loan originator. 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, address, and phone number
- Bond amount
- Date the bond is signed
What Can Louisiana Mortgage Loan Originators Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, mortgage loan originators in Louisiana 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
- Honor all agreements made with consumers
What Other Insurance Products Can Agents Offer Mortgage Loan Originators in Louisiana?
Louisiana does not require mortgage loan originators 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 Louisiana Mortgage Loan Originator Customers?
The NMLS conveniently provides a public database to search for active mortgage loan originators in Louisiana. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
