North Carolina Mortgage Lender Bond: A Comprehensive Guide
July 15, 2021
This guide provides information for insurance agents to help their customers obtain North Carolina Mortgage Lender 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: $150,000 for initial license applicants (more on this later)
- Who Needs it: All mortgage lenders operating in North Carolina
- Purpose: To ensure the public will receive compensation for any damages should the mortgage lender fail to comply with licensing law
- Who Regulates Mortgage Lenders in North Carolina: The North Carolina Commissioner of Banks Office
Background
North Carolina statute 53-244.040 requires all mortgage lenders operating in the state to obtain a license with the Commissioner of Banks Office. The North Carolina 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, mortgage lenders must purchase and maintain a $150,000 surety bond to be eligible for licensure.
What is the Purpose of the North Carolina Mortgage Lender Bond?
North Carolina requires 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 North Carolina House Bill 1523. 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 mortgage lender breaks licensing laws.
How Can an Insurance Agent Obtain a North Carolina Mortgage Lender Bond?
BondExchange makes obtaining a North Carolina 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?
North Carolina statute 53-244.103 dictates that the limit on the mortgage lender bond is $150,000 for all first time license applicants. When renewing their license, mortgage lenders in North Carolina will need to increase their bond amount to reflect the annual volume of mortgage loans originated, as outlined in the table below:
| Mortgage Loans Orginated | Bond Amount |
|---|---|
| Less than $10 million | $150,000 |
| $10 million to less than $50 million | $250,000 |
| $50 million or more | $500,000 |
Is a Credit Check Required for the North Carolina Mortgage Lender Bond?
Surety companies will run a credit check on the owners of the mortgage company to determine eligibility and pricing for the North Carolina 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 North Carolina Mortgage Lender Bond Cost?
The North Carolina Mortgage Lender 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 $150,000 bond requirement.
$150,000 Mortgage Lender Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $750 |
| 650 – 699 | $1,500 |
| 625 – 649 | $1,875 |
| 600 – 624 | $2,820 |
| 550 – 599 | $6,000 |
| 500 – 549 | $7,500 |
How Does North Carolina Define “Mortgage Lender?”
North Carolina statute 53-244.030 defines a mortgage lender as any business entity who closes a mortgage loan or advances funds to a borrower under a mortgage loan on residential real property located in North Carolina.
How do Mortgage Lenders Apply For a License in North Carolina?
Mortgage lenders in North Carolina 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 North Carolina 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 North Carolina Mortgage Lender License must have a company net worth (assets – liabilities) of at least $100,000 including evidence of liquidity in at least $1 million (may include a warehouse line of credit). Applicants must submit an unqualified audited financial statement verifying their net worth when submitting their license application.
Step 2 – Purchase a Surety Bond
First time mortgage lender license applicants must purchase and maintain a $150,000 surety bond
Step 3 – Hire a Qualifying Individual
Mortgage lenders must employ a qualifying individual who is capable of handling the day to day operations of the mortgage lending business. The qualifying individual is responsible for the actions of the mortgage lending business, and must meet all of the following criteria
-
- Have a minimum of three years mortgage lending or brokering experience
- Has completed the required education course
- Has meet one of the following examination requirements:
- Passing results on both the National and North Carolina State components of the SAFE Test
- Passing results on both the National and Stand-alone UST components of the SAFE Test
- Passing results on the National Test Component with Uniform State Content
Step 4 – Request a NMLS Account
The North Carolina 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 North Carolina Mortgage Lender License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Company financial statements
- The following company contact information:
- Primary
- Consumer Complaint (Primary)
- Licensing
- Consumer Complaint (Public)
- Exam Delivery
- Consumer Complaint (Regulator)
- Legal
- Pre-Exam Contact
- Company’s FinCEN registration confirmation number and filing date
- Disclosure questions
- Company’s AML/BSA Policy
- Company business plan containing the following information:
- Marketing strategies
- Products
- Target markets
- Operating structure
- Business activities that will be conducted in North Carolina
- Mortgage activities
- Certificate of Good Standing
- Company formation documents
- Management chart containing the following information:
- Divisions
- Officers/Directors (names and titles)
- Managers (names and titles)
- Staff positions (number of staff in each position)
- Sample mortgage servicing and subservicing agreements
- Organizational chart containing the following information:
- Direct Owners (total direct ownership percentage must equate to 100% on the chart for review)
- Indirect Owners (including all parent companies or individuals going back to an individual or publicly traded company equating to 100% of ownership on the chart for review)
- Subsidiaries and Affiliates
- Documentation verifying the company’s warehouse line of credit
- Lease agreement for the company’s principal place of business
- Verification of experience for the company’s qualifying individual
- Latest bank statement for the company’s escrow account
- Schedule of the range of costs and fees
Mortgage lenders must pay the following fees when submitting their license application:
-
- $1,250 license fee
- $500 reverse mortgage lender fee (if applicable)
- $100 NMLS processing fee
- $36.25 background check fee (per person)
- $15 credit report fee (per person)
How Do North Carolina 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 North Carolina Mortgage Lender License expires on December 31 of each year and must be renewed before the expiration date. When renewing their license, mortgage lenders in North Carolina will need to increase their bond amount to reflect the annual volume of mortgage loans originated, as outlined in the above section.
What Are the Insurance Requirements for the North Carolina Mortgage Lender License?
North Carolina does not require mortgage lenders to purchase any form of liability insurance as a prerequisite to obtaining a business license. Mortgage lenders must purchase and maintain a surety bond (limits outlined above).
How Do North Carolina Mortgage Lenders File Their Bond?
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 and address of entity/individual(s) buying the bond
- Surety company’s name and address
- Bond amount
- Date the bond goes into effect
- Date the bond is signed
What Can North Carolina Mortgage Lenders Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, mortgage lenders in North Carolina 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 Mortgage Lenders in North Carolina?
North Carolina does not require 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 North Carolina Mortgage Lender Customers?
The NMLS conveniently provides a public database to search for active mortgage lenders in North Carolina. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
