Maryland Mortgage Lender Bond: A Comprehensive Guide
June 3, 2021
This guide provides information for insurance agents to help their customers obtain Maryland Mortgage Lender Bonds
At a Glance:
- Average Cost: Between .75% to 5% of the bond amount per year based on the applicant’s credit
- Bond Amount: Based off of the volume of mortgage loans originated in the previous 12 months:
Table 1.1
| Mortgage Loans Originated (Last 12 Months) | Bond Amount |
|---|---|
| Under $3 million | $50,000 |
| $3 million to $10 million | $100,000 |
| Over $10 million | $150,000 |
- Who Needs it: All mortgage lenders operating in Maryland
- Purpose: To ensure the public will receive compensation for any damages should the mortgage lender fail to comply with licensing law
- Who Regulates Mortgage Lenders in Maryland: The Maryland Commissioner of Financial Regulation
Background
Maryland statute 11-504 requires all mortgage lenders operating in the state to obtain a license with the Commissioner of Financial Regulation. The Maryland legislature enacted the licensing laws and regulations to ensure that mortgage lenders engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, mortgage lenders must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Maryland Mortgage Lender Bond?
Maryland requires mortgage 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 mortgage lender fails to comply with the licensing regulations set forth in Maryland statutes 11-501-524. Specifically, the bond protects the public in the event the mortgage lender engages in any acts of fraud or breaches any contracts made with consumers. In short, the bond is a type of insurance that protects the public if the mortgage lender breaks licensing laws.
How Can an Insurance Agent Obtain a Maryland Mortgage Lender Bond?
BondExchange makes obtaining a Maryland Mortgage 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.
Is a Credit Check Required for the Maryland Mortgage Lender Bond?
Surety companies will run a credit check on the owner’s of the mortgage lending company to determine eligibility and pricing for the Maryland Mortgage Lender bond. Owners 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 Maryland Mortgage Lender Bond Cost?
The Maryland Installment Loan surety bond can cost anywhere between .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 $50,000 bond requirement
$50,000 Mortgage Lender Bond Cost
Table 1.2
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $375 |
| 575 – 624 | $1,875 |
| 550 – 574 | $2,500 |
| 500 – 549 | $3,750 |
*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 Maryland Define “Mortgage Lender?”
Maryland statute 11-501 defines a mortgage broker as any individual or business entity who performs on or more of the following services:
- Aids or assists a borrower in obtaining a mortgage loan
- Makes a mortgage loan to any person
- Collects payments on a mortgage loan from a borrower and distributes these funds to the appropriate third party
Exemptions to this definition include:
- A financial institution that accepts deposits
- The Federal Home Loan Mortgage Corporation
- The Federal National Mortgage Association
- The Government National Mortgage Association
- Any person engaged exclusively in the acquisition of all or any portion of a mortgage loan under any federal, State, or local governmental program of mortgage loan purchases
How do Mortgage Lenders Apply for a License in Maryland?
Mortgage lenders in Maryland 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 Maryland Mortgage 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 Maryland Mortgage Lender License must have a company net worth (assets – liabilities) of at least $25,000 if the lender does not lend money secured by a dwelling or residential real estate. If the applicant does lend money secured by a dwelling or residential real estate, they must amass a minimum company net worth based on their aggregate lending in the prior 12 months:
Table 1.3
| Aggregate Lending in Prior 12 Months | Minimum Net Worth |
|---|---|
| $1 million or less | $25,000 |
| Over $1 million to $5 million | $50,000 |
| Over $5 million to $10 million | $100,000 |
| Over $10 million | $250,000 |
Applicants must submit a financial statement, prepared by a CPA, verifying their net worth when submitting their license application.
Step 2 – Purchase a Surety Bond
Mortgage must purchase and maintain a surety bond (limits outlined in Table 1.1)
Step 3 – Hire a Qualifying Individual
Applicants for the Maryland Mortgage Lender License must employ at least one individual who has a minimum of three years of experience in the mortgage lending business. License applicants must submit proof of experience when submitting their application.
Step 4 – Request a NMLS Account
The Maryland Mortgage 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 Maryland Mortgage Lender License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Financial statements indicating the company’s net worth
- Company formation documents and information on all company owners/officers
- Certificate of Good Standing
- Organizational chart detailing the company’s ownership structure
Mortgage lenders must pay the following fees when submitting their license application:
-
- $1,000 license fee
- $100 processing fee
- $36.25 background check fee (per person)
- $15 credit report fee (per person)
- $1 investigation fee
How Do Maryland Mortgage Lenders Renew Their License?
Mortgage lenders can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Maryland Mortgage Lender License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Maryland Mortgage Lender License?
The State of Maryland does not require mortgage lenders to obtain any form of liability insurance as a prerequisite to obtaining a business license. Mortgage must purchase and maintain a surety bond (limits outlined in Table 1.1).
How Do Maryland Mortgage Lenders File Their Bond?
Mortgage lenders 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 lending 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
- Bond amount
- Date the bond goes into effect
- Date the bond is signed
What Can Maryland Mortgage Lenders Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, mortgage lenders in Maryland 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
- Do not breach any contracts made with consumers
What Other Insurance Products Can Agents Offer Mortgage Lenders in Maryland?
Maryland does not require mortgage lenders 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 Maryland Mortgage Lender Customers?
The NMLS conveniently provides a public database to search for active mortgage lenders in Maryland. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
