Indiana Loan Broker Bond: A Comprehensive Guide
May 13, 2021
This guide provides information for insurance agents to help loan brokers obtain Indiana Loan Broker Bonds
At a Glance:
- Average Cost: Between 0.5% to 5% of the bond amount per year based on the applicant’s credit
- Bond Amount: Dependent on the amount of residential mortgage loans originated in the previous calendar year:
| Loans Originated | Bond Amount |
|---|---|
| Less than $5 million | $50,000 |
| $5 million to $20 million | $60,000 |
| Over $20 million | $75,000 |
- Who Needs it: All loan brokers seeking to obtain a license in Indiana
- Purpose: To ensure the public will receive compensation for any damages should the loan broker fail to comply with licensing law
- Who Regulates Loan Brokers in Indiana: The Indiana Secretary of State Securities Division
Background
Indiana code 23-2-5-4 requires all loan brokers operating in the state to obtain a license with the Secretary of State Securities Division. The Indiana legislature enacted the licensing laws and regulations to ensure that loan brokers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, loan brokers must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Indiana Loan Broker Bond?
Indiana requires loan brokers 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 loan broker fails to comply with the licensing regulations set forth in Indiana code 23-2-5. Specifically, the bond protects consumers in the event the loan broker engages in any acts of fraud or misrepresentation. In short, the bond is a type of insurance that protects the public if the loan broker breaks licensing laws.
How Can an Insurance Agent Obtain an Indiana Loan Broker Surety Bond?
BondExchange makes obtaining an Indiana Loan Broker Bond easy. Simply login to your account and use our keyword search to find the “loan” 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 Indiana Loan Broker Bond?
Surety companies will run a credit check on the owners of the loan brokerage company to determine eligibility and pricing for the Indiana Loan Broker 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 Indiana Loan Broker Bond Cost?
The Indiana Loan Broker surety bond can cost anywhere between 0.5% 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 $60,000 bond requirement.
$60,000 Loan Broker Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $300 |
| 650 – 699 | $600 |
| 625 – 649 | $750 |
| 600 – 624 | $1,128 |
| 550 – 599 | $2,400 |
| 500 – 549 | $3,000 |
*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 Indiana Define “Loan Broker?”
Indiana code 23-2-5-3 defines a loan broker as any individual or business entity that procures a residential mortgage loan from a third party either directly or indirectly.
Exemptions to this definition include:
- Supervised financial institutions
- Insurance companies
- Any person arranging financing for the sale of their own product
How do Loan Brokers Apply for a License in Indiana?
Loan Brokers in Indiana 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 Indiana Loan Broker License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Loan brokers must purchase and maintain a surety bond (limits outlined above)
Step 2 – Hire a Principal Manager
Loan brokers must sponsor a principal manager who is responsible for handling the day to day operations of a maximum of five loan broker branch locations. The principal manager must be licensed by the Indiana Secretary of State
Step 3 – Request a NMLS Account
The Indiana Loan 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 Indiana Loan Broker License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the a copy of their Secretary of State business filing (company formation documents)
Loan brokers must pay the following fees when submitting their license application:
-
- $100 processing fee
- $200 application fee
- $26.25 background check fee (per person)
- $15 credit report fee (per person)
- $100 fee for each ultimate equity owner who owns 10% or more of the loan brokerage company
How Do Indiana Loan Brokers Renew Their License?
Loan brokers can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Indiana Loan Broker License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Indiana Loan Broker License?
The State of Indiana does not require loan brokers to obtain any form of liability insurance as a prerequisite to obtaining a business license. Loan brokers must purchase and maintain a surety bond (limits outlined above).
How Do Indiana Loan Brokers File Their Bond?
Loan brokers 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 loan brokerage company. The surety company should include the following information on the bond form:
- Legal name, city and state of entity/individual(s) buying the bond
- Surety company’s name and state
- Bond amount
- Date the bond is signed
What Can Indiana Loan Brokers Do to Avoid Claims Against Their Bond?
In order to avoid claims made against their bond, loan brokers in Indiana must ensure not to engage in any acts of fraud or misrepresentation when servicing Indiana borrowers.
What Other Insurance Products Can Agents Offer Loan Brokers in Indiana?
Indiana does not require loan brokers 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 Indiana Loan Broker Customers?
The NMLS conveniently provides a public database to search for active loan brokers in Indiana. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
