Massachusetts Mortgage Broker Bond: A Comprehensive Guide

May 27, 2021

This guide provides information for insurance agents to help their customers obtain Massachusetts Mortgage Broker Bonds

At a Glance:

• Average Cost: Between $563 to $3,750 per year based on the applicant’s credit
• Bond Amount: $75,000
• Who Needs it: All mortgage brokers operating in Massachusetts
• 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 Massachusetts: The Massachusetts Division of Banks

Background

Massachusetts general law 255E s. 2 requires all mortgage brokers operating in the state to obtain a license with the Division of Banks. The Massachusetts 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, mortgage brokers must purchase and maintain a $75,000 surety bond to be eligible for licensure.

What is the Purpose of the Massachusetts Mortgage Broker Bond?

Massachusetts requires mortgage 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 mortgage broker fails to comply with the licensing regulations set forth in Massachusetts general law 255E. Specifically, the bond protects the public in the event the mortgage broker engages in any acts of fraud or fails to honor agreements made with consumers. In short, the bond is a type of insurance that protects the public if the mortgage broker breaks licensing laws.

How Can an Insurance Agent Obtain a Massachusetts Mortgage Broker Surety Bond?

BondExchange makes obtaining a Massachusetts 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 Massachusetts Mortgage Broker Bond?

Surety companies will run a credit check on the owner’s of the mortgage brokerage firm to determine eligibility and pricing for the Massachusetts Mortgage Broker bond. Owners 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 Massachusetts Mortgage Broker Bond Cost?

The Massachusetts Mortgage Broker surety bond can cost anywhere between $563 to $3,750 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 $75,000 bond requirement.

$75,000 Mortgage Broker Bond Cost

*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 Massachusetts Define “Mortgage Broker?”

Massachusetts general law 255E s. 1 defines a mortgage broker as any individual or business entity who negotiates, places, or assists consumers in finding residential mortgage loans.

How do Mortgage Brokers Apply for a License in Massachusetts?

Mortgage brokers in Massachusetts 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 Massachusetts Mortgage Broker 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 Massachusetts Mortgage Broker License must have a company net worth (assets – liabilities) of at least $25,000. Applicants must submit either an audited or reviewed financial statement, prepared by a CPA, verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Mortgage brokers must purchase and maintain a $75,000 surety bond

Step 3 – Hire a Qualifying Individual

Applicants for the Massachusetts Mortgage Broker License must employ a qualified individual who is capable of managing the day to day operations of the mortgage brokerage firm. Applicants must hire a qualified individual for each branch location where the company services Massachusetts consumers.

Step 4 – Request a NMLS Account

The Massachusetts 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 5 – Complete the Application

All Massachusetts Mortgage Broker License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

• • Audited or reviewed financial statements indicating a company net worth of at least $25,000
  • The following company contact information:
    • Primary company contact
    • Primary consumer complaint
    • Accounting
    • Exam Billing
    • Licensing
    • Consumer Complaint (Public) Exam Delivery
    •  Litigation
    • Consumer Complaint (Regulator)
    • Legal
    • Pre-Exam Contact
  • Location where company keeps all of its books/records and the software used to maintain such items
  • Company’s independently reviewed AML policy
  • Company business plan containing the following information:
    • Marketing strategies
    • Products and services
    • Target markets
    • Fee schedule
    • Operating structure the applicant intends to employ
    • Operational policies and procedures
    • The credit market(s) intended to be addressed in Massachusetts (i.e., A, B, C, D, paper)
    • Proposed rates and fees to be charged in Massachusetts; and marketing strategies
    • Records Retention Policy
  • Certificate of Good Standing
  • Company formation documents
  • Management chart detailing the company’s hierarchy
  • Organizational chart detailing the company’s ownership structure

The following items must be emailed to nmls@mass.gov:

• • Financial statements for all company owners with an ownership stake of 10% or more
  • W-9 Form
  • Third party verification that the company’s control person has the required five years of experience

Mortgage brokers must pay the following fees when submitting their license application:

• • $600 license fee
  • $300 investigation fee
  • $100 NMLS processing fee
  • $36.25 background check fee (per person)
  • $15 credit report fee (per person)

How Do Massachusetts Mortgage Brokers Renew Their License?

Mortgage brokers can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Massachusetts 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 Massachusetts Mortgage Broker License?

The State of Massachusetts does not require mortgage brokers to obtain any form of liability insurance as a prerequisite to obtaining a business license. Mortgage brokers must purchase and maintain a $75,000 surety bond.

How Do Massachusetts Mortgage Brokers File Their Bond?

Mortgage 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 mortgage brokerage firm. 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 state of incorporation
• Bond amount
• Date the bond is signed

What Can Massachusetts Mortgage Brokers Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, mortgage brokers in Massachusetts must follow all license regulations in the state, including some of the most important issues below that tend to cause claims:

• Do not engage in any acts of fraud
• Honor all agreements made with consumers

What Other Insurance Products Can Agents Offer Mortgage Brokers in Massachusetts?

Massachusetts does not require mortgage 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 Massachusetts Mortgage Broker Customers?

The NMLS conveniently provides a public database to search for active mortgage brokers in Massachusetts. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.