Arkansas Mortgage Broker Bond: A Comprehensive Guide
March 3, 2021
This guide provides information for insurance agents to mortgage brokers obtain Arkansas Mortgage Broker Bonds
At a Glance:
- Average Cost: Between 0.75% to 5% of the bond amount per year based on the broker’s credit
- Bond Amount: Based on the mortgage loan activity of the mortgage broker in the previous calendar year:
Table 1.1
| Prior Year Activity | Bond Amount |
|---|---|
| $10 million or less | $100,000 |
| Over $10 million to $25 million | $150,000 |
| Over $25 million | $200,000 |
- Who Needs It: All individuals and business entities seeking to obtain a mortgage broker license in the State of Arkansas
- Purpose: To ensure the public will receive compensation for any damages should the mortgage broker fail to comply with licensing law
- Who Regulates Mortgage Brokers in Arkansas: The Arkansas Securities Department
Background
Arkansas Statute 23-39-503 requires mortgage brokers operating in the state to obtain a license with the Securities Department. The Arkansas legislature enacted the licensing laws and regulations to ensure that mortgage brokers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, brokers must purchase and maintain a mortgage broker surety bond (limits outlined in Table 1.1) to be eligible for licensure.
What is the Purpose of the Arkansas Mortgage Broker Bond?
Arkansas requires brokers to purchase the Mortgage Broker Bond as part of the application process to obtain a mortgage broker license. The bond ensures that the public will receive compensation for financial harm if the broker fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the broker breaks licensing laws.
How Can an Insurance Agent Obtain an Arkansas Mortgage Broker Surety Bond?
BondExchange makes obtaining an Arkansas Mortgage Broker 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 Arkansas Mortgage Broker Bond?
Surety companies will run a credit check on the mortgage broker to determine eligibility and pricing for the Arkansas Mortgage Broker bond. Brokers with excellent credit and work experience can expect to receive the best rates. Brokers 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 broker’s credit.
How Much Does the Arkansas Mortgage Broker Bond Cost?
The Arkansas Mortgage Broker 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 the $100,000 bond requirement.
$100,000 Mortgage Broker Bond Cost
Table 1.2
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $750 |
| 650 – 699 | $1,000 |
| 625 – 649 | $1,250 |
| 600 – 624 | $1,880 |
| 550 – 599 | $4,000 |
| 500 – 549 | $5,000 |
*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 Arkansas Define “Mortgage Broker”?
Arkansas Statute 23-39-502 defines a mortgage broker as any individual or business entity who engages in one or more of the following activities:
- Accepts or offers to accept an application for a mortgage loan
- Solicits or offers to solicit an application for a mortgage loan
- Negotiates or offers to negotiate the terms or conditions of a mortgage loan
- Issues or offers to issue mortgage loan commitments or interest rate guarantee agreements to borrowers
How Do Mortgage Brokers Apply for a License in Arkansas?
Brokers in Arkansas must navigate several steps to secure their mortgage broker license. Below are the general guidelines, but brokers should refer to the licensing statutes for details on the process.
License Period – The Arkansas Mortgage Broker License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Mortgage brokers must purchase and maintain a mortgage broker surety bond (limits outlined in Table 1.1)
Step 2 – Designate a Qualifying Individual
Brokers must employ at least one “managing principal” who handles the day to day operations of the broker’s business. Managing principals must have a minimum of three years of relevant work experience.
Step 3 – Request a NMLS Account
The Arkansas Mortgage Broker 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 Arkansas Mortgage Broker License applications can be completed online through the NMLS. Brokers must complete entire the application, including the following steps:
4.a Financial Statement – Brokers must submit an internally prepared financial statement of their most recent fiscal year which indicate a company net worth (assets – liabilities) of at least $25,000
4.b Background Check – All managing principals are required to authorize an FBI background check to be completed
4.c Business Plan – Applicants must submit a business plan containing the following information:
-
- Marketing strategies
- Products
- Target markets
- Fee schedule
- Operating structure the applicant intends to employ
4.d Certificate of Good Standing – Brokers must submit a Certificate of Good Standing which can be obtained from the Arkansas Secretary of State
4.e Fees – All license applicants must pay the following fees when submitting their license application:
-
- $750 application fee
- $100 NMLS initial processing fee
*Individuals who are applying for a combination of the mortgage broker, banker or servicer license will need to submit a separate license application
How Do Mortgage Brokers Renew Their License in Arkansas?
Brokers can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. Brokers must pay a $350 renewal fee, plus an additional $100 for every branch office. The Arkansas Mortgage Broker License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Arkansas Mortgage Broker License?
The State of Arkansas does not require mortgage brokers to obtain any form of liability insurance as a prerequisite to obtaining a Mortgage Broker License. Brokers must purchase and maintain a mortgage broker surety bond.
How Do Arkansas Mortgage Brokers File Their Bond?
Brokers should submit the completed bond form, including the power of attorney, electronically through the NMLS. Additionally, bankers will need to mail the completed bond form to the following address:
Arkansas Securities Department
1 Commerce Way, Suite 402
Little Rock, AR 72202
The mortgage broker surety bond requires signatures from both the surety company that issues the bond and the broker. 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
- License type (Broker, Banker, or Servicer)
- Bond amount
- Date the bond is signed
What Can Businesses Do to Avoid Claims Against the Arkansas Mortgage Broker Bond?
To avoid claims on the Mortgage Broker Bond, brokers must follow all license regulations in the state, including some of the most important issues below that tend to cause claims:
- Do not engage, or allow representatives of the business to engage, in any acts of fraud
- Pay all taxes and fees on time and in full
What Other Insurance Products Can Agents Offer Mortgage Brokers in Arkansas?
Arkansas does not require mortgage brokers to obtain any form of liability insurance. 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 Arkansas Mortgage Broker Customers?
The NMLS conveniently provides a public database to search for active mortgage brokers in Arkansas. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
What other Financial Service Bonds are Required in Arkansas?
Arkansas requires businesses to purchase specific bonds correlating with their license type. Below are all the different financial services bonds required by the State of Arkansas:
- Money Transmission: Custom bond limit
- Collection Agency: Bond limit ranges from $100,000 to $200,000
- Mortgage Servicer: Bond limit ranges from $100,000 to $200,000
- Mortgage Banker: Bond limit ranges from $100,000 to $200,000
