New York Mortgage Broker Bond: A Comprehensive Guide

August 4, 2021

This guide provides information for insurance agents to help their customers obtain New York Mortgage Broker 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: Between $10,000 to $100,000 (more on this later)
• Who Needs it: All mortgage brokers operating in New York
• Purpose: To ensure the public will receive compensation for any damages should the mortgage broker violate licensing law
• Who Regulates Mortgage Brokers In New York: The New York Department of Financial Services

Background

New York statute 590 requires all mortgage brokers operating in the state to register with the Department of Financial Services. The New York legislature enacted the registration laws and regulations to ensure that mortgage brokers engage in ethical business practices. In order to provide financial security for the enforcement of the registration law, mortgage brokers must purchase and maintain a surety bond to be eligible for registration.

What is the Purpose of the New York Mortgage Broker Bond?

New York requires mortgage brokers to purchase a surety bond as part of the application process to obtain a business registration. The bond ensures that the public will receive compensation for financial harm if the mortgage broker fails to comply with the regulations set forth in New York Banking Code article 12-D. Specifically, the bond protects the public in the event the mortgage broker engages in any acts of fraud or charges unearned fees. In short, the bond is a type of insurance that protects the public if the mortgage broker breaks registration laws.

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

BondExchange makes obtaining a New York 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.

How is the Bond Amount Determined?

New York statute 591-A dictates that the limit on the mortgage broker bond be a minimum of $10,000. The statute also grants the Department of Financial Services the authority to increase the bond limit to a maximum of $100,000 if the mortgage broker accrues significant consumer complaints or engages in any misconduct relating to their registration.

Is a Credit Check Required for the New York Mortgage Broker Bond?

Surety companies will run a credit check on the owners of the mortgage company to determine eligibility and pricing for the New York 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 New York Mortgage Broker Bond Cost?

The New York Mortgage Broker 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 $10,000 bond requirement.

$10,000 Mortgage Broker Bond Cost

How Does New York Define “Mortgage Broker?”

To paraphrase New York statute 590, a mortgage broker is any business entity who solicits, processes, places, or negotiates mortgage loans for others.

How do Mortgage Brokers Apply For a Registration in New York?

Mortgage brokers in New York must navigate several steps to secure their registration. Below are the general guidelines, but applicants should refer to the NMLS’s application guidelines for details on the process.

Registration Period – The New York Mortgage Broker Registration expires on December 31 of each year and must be renewed before the expiration date

Step 1 – Purchase a Surety Bond

Mortgage brokers must purchase and maintain both a surety bond with a minimum limit of $10,000

Step 2 – Purchase Insurance

Mortgage brokers must purchase workers’ compensation insurance coverage

Step 3 – Hire a Qualifying Individual

Mortgage brokers must employ a qualifying individual who is capable of handling the day to day operations of the brokerage company. The qualifying individual must have a minimum of two years industry experience and be placed in a managerial position.

Step 4 – Request a NMLS Account

The New York Mortgage Broker Registration application is submitted electronically through the Nationwide Multistate Licensing System (NMLS). To submit a registration application, applicants must first request to obtain an NMLS account.

Step 5 – Complete the Application

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

• • The following company contacts:
    • Primary
    • Primary consumer complaint
    • Accounting
    • Exam Billing
    • Licensing
    • Consumer Complaint (Public)
    • Exam Delivery
    • Litigation
    • Consumer Complaint (Regulator)
    • Legal
    • Pre-Exam Contact
  • Disclosure questions
  • Detailed company business plan
  • Company staffing and internal policies that address the following
    • Compliance program
    • Fair Lending Plan
    • AML/BSA Policy
  • Company formation documents
  • Company management and organizational charts
  • Personal financial statements for all company owners with a 10% stake or higher
  • Certificate of Good Standing
  • Word approval authorization certificate
  • List of the company’s three most used lenders
  • Personal questionnaires for all control persons and the three most senior company executive officers
  • Resumes for all control persons, the three most senior company executives, and the qualifying individual
  • Litigation affidavit
  • Certification and affirmation
  • Corporate resolutions
  • Certificate of compliance
  • Leases for all company property
  • Website questionnaire

How Do New York Mortgage Brokers Renew Their Registration?

Mortgage brokers can renew their registration online through the NMLS. Registration holders need to simply login to their account to access their renewal application. The New York Mortgage Broker Registration expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the New York Mortgage Broker Registration?

New York requires mortgage brokers to purchase workers’ compensation insurance as a prerequisite to obtaining a business registration. Mortgage brokers must purchase and maintain both a surety bond with a minimum limit of $10,000.

How Do New York 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 company. The surety company should include the following information on the bond form:

• Name and location of entity/individual(s) buying the bond
• Surety company’s name and location
• Bond amount
• Date the bond goes into effect
• Date the bond is signed

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

To avoid claims on their bond, mortgage brokers in New York must ensure that they follow all registration 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
• Do not breach any contracts made with consumers
• Do not charge exorbitant fees

What Other Insurance Products Can Agents Offer Mortgage Brokers in New York?

New York requires mortgage brokers to purchase worker’s compensation insurance. Additionally, most reputable mortgage brokers will seek to purchase liability insurance as well. Bonds are our only business at BondExchange, so we do not issue other types of 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 York Mortgage Broker Customers?

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