New Jersey Correspondent Residential Mortgage Lender Bond: A Comprehensive Guide
July 27, 2021
This guide provides information for insurance agents to help their customers obtain New Jersey Residential Mortgage Lender 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: Minimum of $150,000 (more on this later)
- Who Needs it: All correspondent residential mortgage lenders operating in New Jersey
- Purpose: To ensure the public will receive compensation for any damages should the mortgage lender violate licensing law
- Who Regulates Correspondent Residential Mortgage Lenders in New Jersey: The New Jersey Department of Banking and Insurance
Background
The New Jersey Department of Banking and Insurance requires all correspondent residential mortgage lenders operating in the state to obtain a license prior to conducting business operations. The New Jersey legislature enacted the licensing laws and regulations to ensure that mortgage lenders engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, correspondent residential mortgage lenders must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the New Jersey Correspondent Residential Mortgage Lender Bond?
New Jersey requires correspondent residential mortgage lenders 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 lender fails to comply with the regulations set forth in the New Jersey Residential Mortgage Lending Act. Specifically, the bond protects the public in the event the mortgage lender 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 correspondent residential mortgage lender breaks licensing laws.
How Can an Insurance Agent Obtain a New Jersey Correspondent Residential Mortgage Lender Bond?
BondExchange makes obtaining a New Jersey Correspondent Residential Mortgage Lender 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.
How is the Bond Amount Determined?
The New Jersey Department of Banking and Insurance dictates that the limit on the correspondent correspondent residential mortgage lender bond be a minimum of $150,000. The department may increase the bond amount at their discretion based on factors such as the amount of loans the lender originates and their company’s financial condition.
Is a Credit Check Required for the New Jersey Correspondent Residential Mortgage Lender Bond?
Surety companies will run a credit check on the owners of the mortgage company to determine eligibility and pricing for the New Jersey Correspondent Residential Mortgage Lender 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 New Jersey Correspondent Residential Mortgage Lender Bond Cost?
The New Jersey Correspondent Residential Mortgage Lender 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 $150,000 bond requirement.
$150,000 Correspondent Residential Mortgage Lender Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $1,125 |
| 650 – 699 | $1,500 |
| 625 – 649 | $1,875 |
| 600 – 624 | $2,820 |
| 550 – 599 | $6,000 |
| 450 – 549 | $7,500 |
How Does New Jersey Define “Correspondent Residential Mortgage Lender?”
New Jersey administrative code 3:15-1.2 defines a correspondent mortgage lender as any business entity who:
- Does not hold mortgage loans in its portfolio, or service mortgage loans, for more than 90 days
- Has shown the ability to fund mortgage loans through warehouse or table funding agreements
How do Correspondent Residential Mortgage Lenders Apply For a License in New Jersey?
Correspondent residential mortgage lenders in New Jersey 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 New Jersey Correspondent Residential Mortgage Lender 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 New Jersey Correspondent Residential Mortgage Lender License must have a company net worth (assets – liabilities) of at least $150,000. Applicants must submit an audited financial statement, prepared by a CPA, verifying their net worth when submitting their license application.
Step 2 – Purchase a Surety Bond
Correspondent residential mortgage lenders must purchase and maintain a surety bond with a minimum limit of $150,000
Step 3 – Hire a Qualifying Individual
At least one company owner/officer must obtain a qualifying individual license in conjunction with the company’s correspondent residential mortgage lender license. Qualifying individuals must complete a pre-licensure education program and pass the required examinations. More information on how to obtain a qualifying individual license can be found here.
Step 4 – Request a NMLS Account
The New Jersey Correspondent Residential Mortgage Lender 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 New Jersey Correspondent Residential Mortgage Lender License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
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- Audited company financial statements showing a net worth of at least $150,000
- Certificate of Good Standing
- Company formation documents
- Organization chart detailing the company’s ownership structure
- Certificate of Office Suitability
Correspondent residential mortgage lenders must pay a $1,300 fee, plus a $36.25 background check fee per person, when submitting their license application.
How Do New Jersey Correspondent Residential Mortgage Lenders Renew Their License?
Mortgage lenders can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The New Jersey Correspondent Residential Mortgage Lender License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the New Jersey Correspondent Residential Mortgage Lender License?
New Jersey does not require correspondent residential mortgage lenders to purchase any form of liability insurance as a prerequisite to obtaining a business license. Correspondent residential mortgage lenders must purchase and maintain a surety bond with a minimum limit of $150,000.
How Do New Jersey Correspondent Residential Mortgage Lenders File Their Bond?
New Jersey mortgage lenders 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, address, and license type of entity/individual(s) buying the bond
- Surety company’s name and state of incorporation
- Bond amount
- Date the bond is signed
- Date the bond goes into effect
What Can New Jersey Correspondent Residential Mortgage Lenders Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, correspondent residential mortgage lenders in New Jersey 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
- Do not breach any contracts made with consumers
What Other Insurance Products Can Agents Offer Correspondent Residential Mortgage Lenders in New Jersey?
New Jersey does not require correspondent residential mortgage lenders 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 New Jersey Correspondent Residential Mortgage Lender Customers?
The NMLS conveniently provides a public database to search for active correspondent residential mortgage lenders in New Jersey. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
