Delaware Mortgage Lender Bond: A Comprehensive Guide
April 19, 2021
This guide provides information for insurance agents to help mortgage lenders obtain Delaware Mortgage lender Bonds
At a Glance:
- Average Cost: Between 0.75% to 5% of the bond amount per year based on the mortgage lender’s credit
- Bond Amount: Between $50,000 to $200,000 (more on this later)
- Who Needs it: All mortgage lenders seeking to obtain a license in Delaware
- 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 Delaware: The Delaware Office of the State Bank Commissioner
Background
Delaware Statute 2202 requires all mortgage lenders operating in the state to obtain a license with the Office of the State Bank Commissioner. The Delaware 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 Delaware Mortgage Lender Bond?
Delaware 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. 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 Delaware Mortgage Lender Surety Bond?
BondExchange makes obtaining a Delaware 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?
Delaware Statute 2207 grants the Delaware Office of the State Bank Commissioner the authority to determine the limit on the Delaware Mortgage Lender Bond on a case by case basis. The bond amount must be between $50,000 to $200,000, and the commission34 will determine the limit by examining the following factors:
- The dollar value of the lender’s Delaware business;
- The dollar value of advance fees collected by the lender;
- The periods for which such fees are held before a loan is funded; and
- Such other and further criteria as the Commissioner may deem necessary and appropriate
Is a Credit Check Required for the Delaware Mortgage Lender Bond?
Surety companies will run a credit check on the owners of the mortgage lending company company to determine eligibility and pricing for the Delaware Mortgage Lender bond. Owner’s 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 Delaware Mortgage Lender Bond Cost?
The Delaware Mortgage Lender 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 the $50,000 bond requirement.
$50,000 Mortgage Lender Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $375 |
| 650 – 699 | $500 |
| 625 – 649 | $625 |
| 600 – 624 | $940 |
| 550 – 599 | $2,000 |
| 450 – 549 | $2,500 |
*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 Delaware Define “Mortgage Lender?”
To paraphrase Delaware Statute 2201, a mortgage lender is any business who makes mortgage loans to borrowers.
How do Mortgage Lenders Apply for a License in Delaware?
Mortgage lenders in Delaware must navigate several steps to secure their license. Below are the general guidelines, but license applicants should refer to the NMLS’s application guidelines for details on the process.
License Period – The Delaware Mortgage Lender License expires annually and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Mortgage lenders must purchase and maintain a surety bond with a limit between $50,000 to $200,000 as determined by the Delaware Office of the State Bank Commissioner
Step 2 – Meet the Capital Requirements
Applicants for the Delaware Mortgage Lender License must first amass a minimum capital of $100,000
Step 3 – Hire a Qualifying Individual
Mortgage lenders must hire a qualifying individual capable, of managing the day to day operations of the business, for each branch location the company operates
Step 4 – Request a NMLS Account
The Delaware 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 Delaware Mortgage Lender License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Unaudited financial statements signed by an executive officer
- Account information for the company’s primary bank accounts
- Employee contact information
- Business plan the company intends to employ
- Certificate of Good Standing obtained from the Delaware Division of Corporations
- Copy of all documents used in the company’s regular course of business
- Management chart showing the company hierarchy
- Organizational chart showing the company’s ownership structure
- Supervisory Assessment Disclosure
- FinCen Disclosure
- Business Survey
Applicants for the Delaware Mortgage Lender License must pay an $600 fee when submitting their license application.
How Do Delaware 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 Delaware Mortgage Lender License expires annually and must be renewed before the expiration date.
What Are the Insurance Requirements for the Delaware Mortgage Lender License?
The State of Delaware does not require mortgage lenders to obtain any form of liability insurance as a prerequisite to obtaining a business license. Mortgage lenders must purchase and maintain a surety bond with a limit between $50,000 to $200,000 as determined by the Delaware Office of the State Bank Commissioner.
How Do Delaware Mortgage Lenders File Their Bond?
Mortgage lenders should submit the completed bond form, including the power of attorney, electronically through the NMLS. The mortgage lender 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 of entity/individual(s) buying the bond
- Surety company’s name and address
- Bond amount
- Date the bond is signed
What Can Delaware Mortgage Lenders Do to Avoid Claims Against Their Bond?
In order to avoid claims made against their bond, mortgage lenders in Delaware must ensure not to engage in any acts of fraud or misrepresentation when servicing customers.
What Other Insurance Products Can Agents Offer Mortgage Lenders in Delaware?
Delaware 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 Delaware Mortgage Lender Customers?
The NMLS conveniently provides a public database to search for active mortgage lenders in Delaware. The database can be accessed here. Contact BondExchange for additional marketing reosurces. Agents can also leverage our print-mail relationships for discounted mailing services.
