Iowa Mortgage Banker Bond: A Comprehensive Guide
April 29, 2021
This guide provides information for insurance agents to help mortgage bankers obtain Iowa Mortgage Banker 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: Based on the dollar volume of loans originated:
| Loans Originated | Bond Amount |
|---|---|
| $0 – $100 million | $100,000 |
| Over $100 million | $150,000 |
- Who Needs it: All mortgage bankers operating in Iowa
- Purpose: To ensure the public will receive compensation for any damages should the mortgage banker fail to comply with licensing law
- Who Regulates Mortgage Bankers in Iowa: The Iowa Division of Banking
Background
Iowa statute 535B.4 requires all mortgage bankers operating in the state to obtain a license with the Division of Banking. The Iowa legislature enacted the licensing laws and regulations to ensure that mortgage bankers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, mortgage bankers must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Iowa Mortgage Banker Bond?
Iowa requires mortgage bankers 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 banker fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the mortgage banker breaks licensing laws.
How Can an Insurance Agent Obtain an Iowa Mortgage Banker Surety Bond?
BondExchange makes obtaining an Iowa Mortgage Banker 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 Iowa Mortgage Banker Bond?
Surety companies will run a credit check on the owners of the mortgage banking company to determine eligibility and pricing for the Iowa Mortgage Banker 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 Iowa Mortgage Banker Bond Cost?
The Iowa Mortgage Banker 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 $100,000 bond requirement.
$100,000 Mortgage Banker Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $750 |
| 650 – 699 | $1,000 |
| 625 – 649 | $1,250 |
| 600 – 624 | $1,500 |
| 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 Iowa Define “Mortgage Banker?”
Iowa statute 533C.102 defines a mortgage banker as any business entity who performs one or more of the following services:
- Makes at least four mortgage loans on residential real property located in Iowa in a calendar year
- Originates at least four mortgage loans on residential real property located in Iowa in a calendar year and sells four or more such loans in the secondary market
- Services at least four mortgage loans on residential real property located in Iowa
How do Mortgage Bankers Apply for a License in Iowa?
Mortgage Bankers in Iowa 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 Iowa Mortgage Banker License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Mortgage bankers must purchase and maintain a surety bond with a limit based on the dollar volume of loans originated:
| Loans Originated | Bond Amount |
|---|---|
| $0 – $100 million | $100,000 |
| Over $100 million | $150,000 |
Step 2 – Request a NMLS Account
The Iowa Mortgage Banker 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 3 – Complete the Application
All Iowa Mortgage Banker License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Company financial statement prepared by a CPA
- Primary company and consumer complaint contact information
- Certificate of Good Standing obtained from the Iowa Secretary of State
- Company formation documents
Mortgage bankers must pay the following fees when submitting their license application:
-
- $400 application fee
- $100 processing fee
- $36.25 background check fee (per person)
How Do Iowa Mortgage Bankers Renew Their License?
Mortgage bankers can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Iowa Mortgage Banker License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Iowa Mortgage Banker License?
The State of Iowa does not require mortgage bankers to obtain any form of liability insurance as a prerequisite to obtaining a license. Mortgage bankers must purchase and maintain a surety bond with a limit based on the dollar volume of loans originated:
| Loans Originated | Bond Amount |
|---|---|
| $0 – $100 million | $100,000 |
| Over $100 million | $150,000 |
How Do Iowa Mortgage Bankers File Their Bond?
Mortgage bankers 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 mortgage banking 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
- Bond amount
- Date the bond is signed
- Date the bond goes into effect
What Can Iowa Mortgage Bankers Do to Avoid Claims Against Their Bond?
In order to avoid claims made against their bond, mortgage bankers in Iowa must follow all license regulations in the state. Including some of the most important issues below that tend to cause claims:
- Faithfully account for all funds received from borrowers
- Honor all written agreements made with borrowers
- Do not engage in any acts of fraud
What Other Insurance Products Can Agents Offer Mortgage Bankers in Iowa?
Iowa does not require mortgage bankers to obtain any form of liability insurance as a prerequisite to obtaining a business license. However, many reputable bankers 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 Iowa Mortgage Banker Customers?
The NMLS conveniently provides a public database to search for active mortgage bankers in Iowa. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
