Montana Mortgage Servicer Bond: A Comprehensive Guide
July 12, 2021
This guide provides information for insurance agents to help their customers obtain Montana Mortgage Servicer 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 mortgage servicers annual unpaid principal balance:
Table 1.1
| Annual Unpaid Principal Balance | Bond Amount |
|---|---|
| Business history of less than one year in Montana; Less than $25 million | $75,000 |
| Less than $100 million | $150,000 |
| Less than $500 million | $250,000 |
| More than $500 million | $350,000 |
- Who Needs it: All mortgage servicers operating in Montana
- Purpose: To ensure the public will receive compensation for any damages should the mortgage servicer fail to comply with licensing law
- Who Regulates Mortgage Servicers in Montana: The Montana Division of Banking and Financial Institutions
Background
Montana statute 39-9-102 requires all mortgage servicers 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 mortgage servicers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, mortgage servicers must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Montana Mortgage Servicer Bond?
Montana requires mortgage servicers 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 servicer fails to comply with the regulations set forth in the Montana Mortgage Act. Specifically, the bond protects the public in the event the mortgage servicer 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 mortgage servicer breaks licensing laws.
How Can an Insurance Agent Obtain a Montana Mortgage Servicer Bond?
BondExchange makes obtaining a Montana Mortgage Servicer 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 Montana Mortgage Servicer Bond?
Surety companies will run a credit check on the owners of the mortgage company to determine eligibility and pricing for the Montana Mortgage Servicer 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 Mortgage Servicer Bond Cost?
The Montana Mortgage Servicer 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 $75,000 bond requirement.
$75,000 Mortgage Servicer Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $375 |
| 650 – 699 | $750 |
| 625 – 649 | $938 |
| 600 – 624 | $1,410 |
| 550 – 599 | $3,000 |
| 500 – 549 | $3,750 |
How Does Montana Define “Mortgage Servicer?”
Montana statute 32-9-103 defines a mortgage servicer as any business entity who receives any scheduled periodic payment from a borrower pursuant to the terms of a residential mortgage loan, residential mortgage servicing documents, or a residential mortgage servicing contract.
How do Mortgage Servicers Apply for a License in Montana
Mortgage servicers 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 Mortgage Servicer License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Mortgage servicers must purchase and maintain a surety bond (limits outlined in Table 1.1)
Step 2 – Meet the Net Worth Requirements
Applicants for the Montana Mortgage Servicer License must have a company net worth (assets – liabilities) of at least:
-
- $1 million, with liquidity of at least .00035 times the UPB of the portfolio, for servicers with non government sponsored enterprise loans; or a $1 million surety bond
- An amount set by the government enterprise for services who deal in government sponsored enterprise loans
Applicants must submit an audited financial statement, prepared by a CPA, verifying their net worth when submitting their license application.
Step 3 – Request a NMLS Account
The Montana Mortgage Servicer 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 Mortgage Servicer License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Audited company financial statements
- Primary company, consumer complaint, and examination contact information
- Information on all company trust accounts used for servicing Montana loans
- Disclosure questions
- 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
- Escrow account authorization
- Proof of experience for the company’s qualifying individual
Mortgage servicers must pay the following fees when submitting their license application:
-
- $750 license fee
- $100 NMLS processing fee
- $36.25 background check fee (per person)
- $15 credit report fee (per person)
How Do Montana Mortgage Services Renew Their License?
Mortgage servicers can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Montana Mortgage Servicer License expires on December 31 of each year and must be renewed before the expiration date.
What are the Insurance Requirements for the Montana Mortgage Servicer License?
Montana does not require mortgage servicers to purchase any form of liability insurance as a prerequisite to obtaining a business license. Mortgage servicers must purchase and maintain a surety bond (limits outlined in Table 1.1).
How Do Montana Mortgage Servicers File Their Bond?
Mortgage servicers 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 company. 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 Mortgage Servicers Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, mortgage servicers 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 Mortgage Servicers in Montana?
Montana does not require mortgage servicers 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 Mortgage Servicer Customers?
The NMLS conveniently provides a public database to search for active mortgage servicers 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.
