Montana Independent Contractor Entity Bond: A Comprehensive Guide
July 12, 2021
This guide provides information for insurance agents to help their customers obtain Montana Independent Contractor Entity 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: Based on the independent contractor’s annual loan production:
Table 1.1
| Annual Loan Production | Bond Amount |
|---|---|
| Business history of less than one year in Montana | $25,000 |
| Less than $50 million | $25,000 |
| Less than $100 million | $50,000 |
| More than $100 million | $100,000 |
- Who Needs it: All Montana businesses offering or engaging in clerical or support duties with respect to any dwelling or residential real estate in Montana
- Purpose: To ensure the public will receive compensation for any damages should the independent contractor fail to comply with licensing law
- Who Regulates Residential Real Estate Independent Contractors in Montana: The Montana Division of Banking and Financial Institutions
Background
Montana statute 32-9-135 requires all residential real estate independent contractors operating in the state to obtain a license with the Division of Banking and Financial Institutions. The Montana legislature enacted the licensing laws and regulations to ensure that independent contractors engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, independent contractors must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Montana Independent Contractor Entity Bond?
Montana requires residential real estate independent contractors 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 independent contractor fails to comply with the regulations set forth in the Montana Mortgage Act. Specifically, the bond protects the public in the event the independent contractor engages in any acts of fraud or breaches any contracts made with consumers. In short, the bond is a type of insurance that protects the public if the independent contractor breaks licensing laws.
How Can an Insurance Agent Obtain a Montana Independent Contractor Entity Bond?
BondExchange makes obtaining a Montana Independent Contractor Entity Bond easy. Simply login to your account and use our keyword search to find the “independent” 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 Montana Independent Contractor Entity Bond?
Surety companies will run a credit check on the owners of the business entity applying for licensure to determine eligibility and pricing for the Montana Independent Contractor Entity 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 Montana Independent Contractor Entity Bond Cost?
The Montana Independent Contractor Entity 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 $25,000 bond requirement.
$25,000 Independent Contractor Entity Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $125 |
| 650 – 699 | $250 |
| 625 – 649 | $313 |
| 600 – 624 | $470 |
| 550 – 599 | $1,000 |
| 500 – 549 | $1,250 |
Who is Required to Obtain an Independent Contractor Entity License?
Montana statute 32-9-103 requires all business entities who perform one or more of the following services to obtain a license:
- Receives, collects, distributes, and analyzes information common for the processing or underwriting of a residential mortgage loan
- Communicates with consumers to obtain the information necessary for the processing or underwriting of a residential mortgage loan, to the extent that the communication does not include offering or negotiating loan rates or terms or counseling consumers about residential mortgage loan rates or terms
Independent contractor entities are not allowed to perform any of the following actions:
- Take a residential mortgage loan application
- Offer or negotiate the terms of a residential mortgage loan
How do Independent Contractor Entities Apply for a License in Montana
Independent contractors in Montana 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 Montana Independent Contractor Entity License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Independent contractor entities must purchase and maintain a surety bond (limits outlined in Table 1.1)
Step 2 – Hire a Qualifying Individual
License applicants must hire a qualifying individual capable of handling the day to day operations of the business. Qualifying individuals oversee the operations of the main or branch office location(s) and must have at least 1.5 years experience as a state or federally licensed mortgage loan originator and have a current Montana Mortgage Loan Originator License. The qualifying individual must be an employee of the license applicant and physically work at a licensed office.
Independent contractor entities must request sponsorship over their qualifying individual.
Step 3 – Request an NMLS Account
The Montana Independent Contractor Entity 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 Montana Independent Contractor Entity License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Primary company, consumer complaint, and examination contact information
- Proof of sponsorship of the company’s qualifying individual
- Company business plan containing the following information:
- Marketing strategies
- Products
- Target markets
- Fee schedule
- Operating structure
- Certificate of Good Standing
- Company formation documents
- Management chart detailing the company’s hierarchy
- Organizational chart detailing the company’s ownership structure
- Proof of experience for the company’s qualifying individual
Independent contractor entities must pay the following fees when submitting their license application:
-
- $500 license fee
- $100 NMLS processing fee
- $36.25 background check fee (per person)
- $15 credit report fee (per person)
How Do Montana Independent Contractor Entities Renew Their License?
Contractors can renew their licenses online through the NMLS. License holders need to simply login to their account to access their renewal application. The Montana Independent Contractor Entity License expires on December 31 of each year and must be renewed before the expiration date.
What are the Insurance Requirements for the Montana Independent Contractor Entity License?
Montana does not require independent contractor entities to purchase any form of liability insurance as a prerequisite to obtaining a business license. Independent contractor entities must purchase and maintain a surety bond (limits outlined in Table 1.1).
How Do Montana Independent Contractor Ententies File Their Bond?
Independent contractor entities 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 company applying for bonding. The surety company should include the following information on the bond form:
- Name and NMLS # of entity/individual(s) buying the bond
- Surety company’s name
- Bond amount
- Date the bond is signed
What Can Montana Independent Contractor Entities Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, independent contractor entities in Montana must follow all license regulations in the state, including some of the most important issues below that tend to cause claim
- Do not engage in any acts of fraud
- Honor all contractual obligations with consumers
What Other Insurance Products Can Agents Offer Independent Contractor Entities in Montana?
Montana does not require independent contractor entities to purchase any form of liability insurance as a prerequisite to obtaining a business 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 Montana Independent Contractor Entity Customers?
The NMLS conveniently provides a public database to search for active independent contractor entities in Montana. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
