Arkansas Mortgage Servicer Bond: A Comprehensive Guide

March 4, 2021

This guide provides information for insurance agents to help mortgage servicers obtain Arkansas Mortgage Servicer Bonds

At a Glance:

• Average Cost: Between 0.75% to 5% of the bond amount per year based on the servicer’s credit
• Bond Amount: Based on the mortgage loan activity of the mortgage servicer in the previous calendar year:

Table 1.1

• Who Needs It: All individuals and business entities seeking to obtain a mortgage servicer license in the State of Arkansas
• Purpose: To ensure the public will receive compensation for any damages should the mortgage servicer fail to comply with licensing law
• Who Regulates Mortgage Servicers in Arkansas: The Arkansas Securities Department

Background

Arkansas Statute 23-39-503 requires mortgage servicers 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 servicers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, servicers must purchase and maintain a mortgage servicer surety bond (limits outlined in Table 1.1) to be eligible for licensure.

What is the Purpose of the Arkansas Mortgage Servicer Bond?

Arkansas requires servicers to purchase the Mortgage Servicer Bond as part of the application process to obtain a mortgage servicer license. The bond ensures that the public will receive compensation for financial harm if the servicer fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the servicer breaks licensing laws.

How Can an Insurance Agent Obtain an Arkansas Mortgage Servicer Surety Bond?

BondExchange makes obtaining an Arkansas Mortgage Servicer 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 Servicer Bond?

Surety companies will run a credit check on the mortgage servicer to determine eligibility and pricing for the Arkansas Mortgage Servicer bond. Servicers with excellent credit and work experience can expect to receive the best rates. Servicers 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 servicers credit.

How Much Does the Arkansas Mortgage Servicer Bond Cost?

The Arkansas Mortgage Servicer 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 Servicer Bond Cost

Table 1.2

*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 Servicer”?

Arkansas Statute 23-39-502 defines a mortgage servicer as “means a person that receives or has the right to receive from or on behalf of a borrower:

(A) Funds or credits in payment for a mortgage loan; or

(B) The taxes or insurance associated with a mortgage loan”

How Do Mortgage Servicers Apply for a License in Arkansas?

Servicers in Arkansas must navigate several steps to secure their mortgage servicer license. Below are the general guidelines, but servicers should refer to the licensing statutes for details on the process.

License Period – The Arkansas Mortgage Servicer 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 Arkansas Mortgage Servicer License must first amass a company net worth (assets – liabilities) of at least $25,000. Servicers must submit financial statements verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Mortgage servicers must purchase and maintain a mortgage servicer surety bond (limits outlined in Table 1.1)

Step 3 – Designate a Qualifying Individual

Servicers must employ at least one “managing principal” who handles the day to day operations of the servicer’s business. Managing principals must have a minimum of three years of relevant work experience.

Step 4 – Request a NMLS Account

The Arkansas Mortgage Servicer 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 Arkansas Mortgage Servicer License applications can be completed online through the NMLS. Servicers must complete entire the application, including the following steps:

5.a Financial Statement – Servicers must submit an audited financial statement, prepared by a CPA, of their most recent fiscal year, which indicates a company net worth (assets – liabilities) of at least $25,000

5.b Background Check – All managing principals are required to authorize an FBI background check to be completed

5.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

5.d Certificate of Good Standing – Servicers must submit a Certificate of Good Standing which can be obtained from the Arkansas Secretary of State

5.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 servicer, banker or broker license will need to submit a separate license application

How Do Mortgage Servicers Renew Their License in Arkansas?

Servicers can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. Servicers must pay a $350 renewal fee, plus an additional $100 for every branch office. The Arkansas Mortgage Servicer 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 Servicer License?

The State of Arkansas does not require mortgage servicers to obtain any form of liability insurance as a prerequisite to obtaining a Mortgage Servicer License. Servicers must purchase and maintain a mortgage servicer surety bond.

How Do Arkansas Mortgage Servicers File Their Bond?

Servicers should submit the completed bond form, including the power of attorney, electronically through the NMLS. Additionally, servicers 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 servicer surety bond requires signatures from both the surety company that issues the bond and the servicer. 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 (Servicer, Broker, or Banker)
• Bond amount
• Date the bond is signed

What Can Businesses Do to Avoid Claims Against the Arkansas Mortgage Servicer Bond?

To avoid claims on the Mortgage Servicer Bond, servicers 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 Servicers in Arkansas?

Arkansas does not require mortgage servicers 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 Servicer Customers?

The NMLS conveniently provides a public database to search for active mortgage servicers 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 $10,000 to $25,000
• Mortgage Banker: Bond limit ranges from $100,000 to $200,000
• Mortgage Broker: Bond limit ranges from $100,000 to $200,00