Michigan Mortgage Loan Originator Bond: A Comprehensive Guide
June 25, 2021
This guide provides information for insurance agents to help their customers obtain Michigan Mortgage Loan Originator 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 yearly dollar amount of mortgage loans originated
Table 1.1
| Total Loans Originated (per year) | Bond Amount |
|---|---|
| $0 to less than $12 million | $10,000 |
| $12 million to less than $24 million | $25,000 |
| $24 million or more | $50,000 |
The above limits only apply to mortgage loan originators (MLOs) who are not covered under their employer’s surety bond. There are separate bond requirements for company-sponsored MLO bonds (more on this later)
- Who Needs it: All Michigan mortgage loan originators (MLOs) who are not covered under their employer’s surety bond
- Purpose: To ensure the public will receive compensation for any damages should the MLO fail to comply with licensing law
- Who Regulates Mortgage Loan Originators in Michigan: The Michigan Department of Insurance and Financial Services
Background
Michigan statute 493.135 requires all MLOs operating in the state to obtain a license with the Department of Insurance and Financial Services. The Michigan legislature enacted the licensing laws and regulations to ensure that MLOs engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, MLOs who are not covered under their employer’s surety bond must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Michigan Mortgage Loan Originator Bond?
Michigan requires mortgage loan originators, who do not have a company sponsorship, 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 MLO fails to comply with the regulations set forth in the Michigan Mortgage Loan Originator Licensing Act. Specifically, the bond protects the public in the event the MLO in any acts of fraud or breaches any consumer contracts. In short, the bond is a type of insurance that protects the public if the MLO breaks licensing laws.
How Can an Insurance Agent Obtain a Michigan Mortgage Loan Originator Surety Bond?
BondExchange makes obtaining a Michigan Mortgage Loan Originator 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.
Who is Required to Purchase the Bond?
Michigan statute 493.159 dictates that MLOs who are not covered under their employer’s surety bond must purchase an individual bond. MLOs whose license is sponsored by their employer do not need to purchase a surety bond. Companies who sponsor their MLO employees must ensure their surety bond coverage is aligned with the following criteria:
Table 1.2
| Total Loans Originated (per year) | Bond Amount |
|---|---|
| $0 to less than $12 million | $50,000 |
| $12 million to less than $24 million | $150,000 |
| $24 million or more | $250,000 |
Is a Credit Check Required for the Michigan Mortgage Loan Originator Bond?
Surety companies will run a credit check on the mortgage loan originator to determine eligibility and pricing for the Michigan Mortgage Loan Originator bond. MLOs with excellent credit and work experience can expect to receive the best rates. MLOs 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 MLO’s credit.
How Much Does the Michigan Mortgage Loan Originator Bond Cost?
The Michigan Mortgage Loan Originator 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 $25,000 bond requirement.
$25,000 Mortgage Loan Originator Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $188 |
| 650 – 699 | $250 |
| 625 – 649 | $313 |
| 600 – 624 | $470 |
| 550 – 599 | $1,000 |
| 500 – 549 | $1,250 |
How Does Michigan Define “Mortgage Loan Originator?”
Michigan statute 493.133 defines a mortgage loan originator as any individual who originates residential mortgage loans and meets all of the following criteria:
- Is not solely a loan processor or underwriter
- Does not only perform real estate brokerage activities and is licensed or registered under the laws of this state, unless the person is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of a lender, mortgage broker, or other mortgage loan originator.
- Is not a person solely involved in extensions of credit relating to timeshare plans
How do Mortgage Loan Originators Apply for a License in Michigan?
Mortgage loan originators in Michigan 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 Michigan Mortgage Loan Originator License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
MLOs who are not covered by their employer’s surety bond must purchase an individual surety bond (limits outlined in Table 1.1). MLOs who are covered under their employer’s surety bond must ensure the bond coverage meets the limits outlined in Table 1.2.
Step 2 – Complete the Pre-Licensure Education
MLOs must complete complete at least 20 hours of pre-licensure education administered by an approved course provider
Step 3 – Pass the Exam
After completing the required 20 hours of pre-licensure education, MLOs must pass the licensing exam
Step 4 – Request an NMLS Account
The Michigan Mortgage Loan Originator 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 Michigan Mortgage Loan Originator License applications can be completed online through the NMLS. Applicants must complete the entire application, and pay the following fees:
-
- $250 license fee
- $36.25 background check fee
- $30 processing fee
- $15 credit report fee
How Do Michigan Mortgage Loan Originators Renew Their License?
MLOs can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Michigan Mortgage Loan Originator License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Michigan Mortgage Loan Originator License?
The State of Michigan does not require mortgage loan originators to obtain any form of liability insurance as a prerequisite to obtaining a business license. MLOs who are not covered by their employer’s surety bond must purchase an individual surety bond (limits outlined in Table 1.1). MLOs who are covered under their employer’s surety bond must ensure the bond coverage meets the limits outlined in Table 1.2.
How Do Michigan Mortgage Loan Originators File Their Bond?
Mortgage loan originators 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 MLO. 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
- Bond amount
- Date the bond is signed
What Can Michigan Mortgage Loan Originators Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, mortgage loan originators in Michigan 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 contractual obligations
What Other Insurance Products Can Agents Offer Mortgage Loan Originators in Michigan?
Michigan does not require mortgage loan originators 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 Michigan Mortgage Loan Originator Customers?
The NMLS conveniently provides a public database to search for active mortgage loan originators in Michigan. The database can be accessed here. Contact BondExchange for help developing a marketing piece. Agents can also leverage our print-mail relationships for discounted mailing services.
