Virginia Mortgage Originator Bond: A Comprehensive Guide
August 31, 2021
This guide provides information for insurance agents to help Mortgage Originators on Virginia Mortgage Originators 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: Minimum of $25,000 (more on this later)
- Who Needs it: All Virginia mortgage loan originators (MLOs) not covered under their employer’s bond
- Purpose: To ensure the public will receive compensation for any damages should the MLO fail to comply with licensing law
- Who Regulates Mortgage Loan Originators In Virginia: The Virginia Bureau Financial Institutions
Background
Virginia statute 6.2-1701 requires all mortgage loan originators operating in the state to obtain a license with the Bureau of Financial Institutions. The Virginia legislature enacted the licensing laws and regulations to ensure that MLOs engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, mortgage loan originators must either purchase and maintain an individual surety bond, or obtain coverage from their employer to be eligible for licensure.
What is the Purpose of the Virginia Mortgage Originator Bond?
Virginia requires MLOs to obtain surety bond coverage 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 MLO fails to comply with the regulations set forth in Virginia statute 6.2-1703. Specifically, the bond protects the public in the event the MLO mishandles consumer funds or breaches any contracts made with consumers. In short, the bond is a type of insurance that protects the public if the MLO breaks licensing laws.
How Can an Insurance Agent Obtain a Virginia Mortgage Originator Surety Bond?
BondExchange makes obtaining a Virginia 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.
How is the Bond Amount Determined?
Virginia statute 6.2-1703 dictates that the limit on the mortgage originator bond must be a minimum of $25,000. The Bureau of Financial Institutions has the authority to increase the bond amount as they see fit based on the total amount of loans originated by the MLO.
Is a Credit Check Required for the Virginia Mortgage Originator Bond?
Surety companies will run a credit check on the MLO (or their employer) to determine eligibility and pricing for the Virginia Mortgage 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 Virginia Mortgage Originator Bond Cost?
The Virginia Mortgage Originator 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 $25,000 bond requirement.
$25,000 Mortgage Originator Bond
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $188 |
| 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 Virginia Define “Mortgage Loan Originator?”
Virginia statute 6.2-1700 defines a mortgage loan originator as any individual who takes an application for or negotiates the terms of a residential mortgage loan or who advertises their capability to do so.
How Do Mortgage Loan Originators Apply for a License in Virginia?
Mortgage Loan Originators in Virginia must navigate several steps to secure their license. Below are the general guidelines, but MLOs should refer to the NMLS’s application guidelines for details on the process.
License Period – The Virginia Mortgage Loan Originator license expires on December 31 of each calendar year and must be renewed before the expiration date
Step 1 – Complete the Pre-licensure Education
MLOs must complete at least 20 hours of prelicensure education, conducted by an approved course provider, that devotes adequate time to covering the following materials
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- Three hours of federal law and regulations
- Three hours of ethics
- Two hours of training related to lending standards for nontraditional mortgage product marketplace
Step 2 – Pass The Exam
Applicants must satisfy one of the following testing requirements:
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- Passing results on both the National and Virginia State components of the SAFE Test
- Passing results on both the National and Stand-alone UST components of the SAFE Test
- Passing results on the National Test Component with Uniform State Content
Step 3 – Obtain Surety Bond Coverage
MLOs must either obtain surety bond coverage through their employer or purchase an individual bond (limits outlined above)
Step 4 – Request an NMLS Account
The Virginia 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 5 – Complete the Application
All Virginia Mortgage Originator License applications can be completed online through the NMLS. Applicants must complete entire the application, and submit the following items:
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- Criminal background check
- Credit report
- Disclosure questions
- Evidence of company sponsorship
- Detailed description of the MLOs employment history
The following items must be mailed to the Bureau of Financial Institutions
The Bureau of Financial Institutions mailing address is:
Virginia Bureau of Financial Institutions
MLO Licensing Unit
P.O. Box 640
Richmond, Virginia 23218-0640
MLOs must pay the following fees when submitting their license application:
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- $150 application fee
- $36.25 background check fee
- $30 NMLS processing fee
- $15 credit report fee
How Do Virginia Mortgage Originators Renew Their License?
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 Virginia Mortgage Originator license expires on December 31 of each calendar year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Virginia Mortgage Originator License?
Virginia does not require mortgage originators to obtain any form of liability insurance as a prerequisite to obtaining a business license. MLOs must either obtain surety bond coverage through their employer or purchase an individual bond (limits outlined above).
How Do Virginia Mortgage Originators File Their Bond?
Mortgage originators should submit the completed bond form, including the power of attorney, electronically through the NMLS. The Mortgage originator surety bond requires signatures from both the surety company that issues the bond and from the MLO. The surety company should include the following information on the bond form:
- Legal name of entity/individual(s) buying the bond
- Surety company’s name
- Bond amount
- Date the bond is signed
What Can Mortgage Originators Do to Avoid Claims Against their Bond?
To avoid claims against their Bond, MLOs 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
- Faithfully account for all consumer funds
What Other Insurance Products Can Agents Offer Mortgage Loan Originators in Virginia?
Virginia does not require mortgage originators to obtain any form of liability insurance as a prerequisite to obtaining a business 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 Virginia Mortgage Loan Originator Customers?
The NMLS conveniently provides a public database to search for active MLOs in Virginia. The database can be accessed here. Contact BondExchange for help developing a marketing piece. Agents can also leverage our print-mail relationships for discounted mailing services.
