Minnesota Residential Mortgage Originator Bond: A Comprehensive Guide
July 1, 2021
This guide provides information for insurance agents to help their customers obtain Minnesota Residential Mortgage Originator Bonds
At a Glance:
- Average Cost: Between 0.75% to 5% of the bond amount per year based on the applicant’s credit
- Bond Amount: Based on the yearly dollar amount of residential mortgage loans closed
Table 1.1
| Mortgage Loans Originated (per year) | Bond Amount |
|---|---|
| $0 to $5 million | $100,000 |
| Over $5 million to $10 million | $125,000 |
| Over $10 million to $25 million | $150,000 |
| Over $25 million | $200,000 |
- Who Needs it: All residential mortgage originators operating in Minnesota
- Purpose: To ensure the public will receive compensation for any damages should the residential mortgage originator fail to comply with licensing law
- Who Regulates Residential Mortgage Originators in Minnesota: The Minnesota Department of Commerce
Background
Minnesota statute 58.04 requires all residential mortgage originators operating in the state to obtain a license with the Department of Commerce. The Minnesota legislature enacted the licensing laws and regulations to ensure that mortgage originators engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, residential mortgage originators must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Minnesota Residential Mortgage Originator Bond?
Minnesota requires residential mortgage originators 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 originator fails to comply with the regulations set forth in Minnesota statutes chapter 58. Specifically, the bond protects the public in the event the mortgage originator fails to pay all required taxes and fees or breaches any contracts made with consumers. In short, the bond is a type of insurance that protects the public if the residential mortgage originator breaks licensing laws.
How Can an Insurance Agent Obtain a Minnesota Residential Mortgage Originator Surety Bond?
BondExchange makes obtaining a Minnesota Residential Mortgage 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.
Is a Credit Check Required for the Minnesota Residential Mortgage Originator Bond?
Surety companies will run a credit check on the mortgage company to determine eligibility and pricing for the Minnesota Residential Mortgage Originator 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 Minnesota Residential Mortgage Originator Bond Cost?
The Minnesota Residential Mortgage Originator 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 the $100,000 bond requirement.
$100,000 Residential Mortgage Originator Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $750 |
| 650 – 699 | $1,000 |
| 625 – 649 | $1,250 |
| 600 – 624 | $1,880 |
| 550 – 599 | $4,000 |
| 450 – 549 | $5,000 |
How Does Minnesota Define “Residential Mortgage Originator”?
Minnesota statute 58.02 defines a residential mortgage originator as any individual or business entity who performs one or both of the following services:
- Solicits or accepts an application for a residential mortgage loan through any medium or mode of communication from a borrower
- Makes residential mortgage loans
How do Residential Mortgage Originators Apply for a License in Minnesota?
Residential mortgage originators in Minnesota 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 Minnesota Residential Mortgage Originator License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Residential mortgage originators must purchase and maintain a surety bond (limits outlined in Table 1.1)
Step 2 – Purchase Workers’ Compensation Insurance
Applicants for the Minnesota Residential Mortgage Originator License must purchase workers’ compensation insurance and submit proof of insurance with their application
Step 3 – Request a NMLS Account
The Minnesota Residential Mortgage 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 4 – Complete the Application
All Minnesota Residential Mortgage Originator License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Proof of workers’ compensation insurance
- List of all company web addresses
- Primary company and consumer complaint contact information
- Company business plan containing the following information:
- Marketing strategies
- Products
- Target markets
- Operating structure the applicant intends to employ
- Certificate of Good Standing
- Company staffing and internal policies
- Affirmation under oath
- Company formation documents
- Management chart showing the company hierarchy
- Ownership chart showing the company ownership structure
- Trust account authorization for all accounts holding consumer funds
Residential mortgage originators must pay the following fees when submitting their license application:
-
- $1,000 license fee
- $100 NMLS processing fee
How Do Minnesota Residential Mortgage Originators Renew Their License?
Residential mortgage originators can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Minnesota Residential Mortgage Originator License expires on December 31 of each year and must be renewed before the expiration date.
What are the Insurance Requirements for the Minnesota Residential Mortgage Originator License?
Minnesota requires residential mortgage originators to purchase workers’ compensation insurance as a prerequisite to obtaining a business license. Residential mortgage originators must purchase and maintain a surety bond (limits outlined in Table 1.1).
How Do Minnesota Residential Mortgage Originators File Their Bond?
Residential mortgage 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 a representative from the mortgage company. The surety company should include the following information on the bond form:
- Legal name and NMLS number of entity/individual(s) buying the bond
- Surety company’s name
- Bond amount
- Date the bond goes into effect
- Date the bond is signed
What Can Minnesota Residential Mortgage Originators Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, residential mortgage originators in Minnesota must follow all license regulations in the state, including some of the most important issues below that tend to cause claims:
- Pay all required taxes and fees
- Do not engage in any acts of fraud
- Honor all contractual obligations
What Other Insurance Products Can Agents Offer Residential Mortgage Originators in Minnesota?
Minnesota requires residential mortgage originators to purchase workers’ compensation insurance as a prerequisite to obtaining a license. 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 Minnesota Residential Mortgage Originator Customers?
The NMLS conveniently provides a public database to search for active residential mortgage originators in Minnesota. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
