Pennsylvania Mortgage Loan Correspondent Bond: A Comprehensive Guide
August 18, 2021
This guide provides information for insurance agents to help their customers obtain Pennsylvania Mortgage Loan Correspondent Bonds
At a Glance:
- Average Cost: Between .75% to 5% of the bond amount per year based on the applicant’s credit
- Bond Amount: Based on the amount of mortgage loans originated
Table 1.1
| Mortgage Loans Originated | Bond Amount |
|---|---|
| Less than $30 million | $100,000 |
| $30 million to less than $100 million | $200,000 |
| $100 million to less than $250 million | $300,000 |
| $250 million or more | $500,000 |
Mortgage loan correspondent companies who accept advanced funds must purchase an additional $100,000 surety bond
- Who Needs it: All mortgage loan correspondent companies operating in Pennsylvania
- Purpose: To ensure the public will receive compensation for any damages should the mortgage loan correspondent company violate licensing law
- Who Regulates Mortgage Loan Correspondent Companies In Pennsylvania: The Pennsylvania Department of Banking and Securities
Background
Pennsylvania statute 6111 requires all mortgage loan correspondent companies operating in the state to obtain a license with the Department of Banking and Securities. The Pennsylvania legislature enacted the licensing laws and regulations to ensure that loan correspondent companies engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, loan correspondent companies must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Pennsylvania Mortgage Loan Correspondent Bond?
Pennsylvania requires mortgage loan correspondent companies 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 loan correspondent company fails to comply with the regulations set forth in Pennsylvania statute 6131. Specifically, the bond protects the public in the event the loan correspondent company 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 loan correspondent company breaks licensing laws.
How Can an Insurance Agent Obtain a Pennsylvania Mortgage Loan Correspondent Surety Bond?
BondExchange makes obtaining a Pennsylvania Mortgage Loan Correspondent 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.
Do Pennsylvania Mortgage Correspondent Companies Need to Purchase Multiple Bonds?
All mortgage loan correspondent companies must purchase a surety bond based on the amount of mortgage loans originated (limits outlined in Table 1.1). Loan correspondent companies who accept funds before providing their services (advanced funds) must also purchase an additional $100,000 surety bond.
Is a Credit Check Required for the Pennsylvania Mortgage Loan Correspondent Bond?
Surety companies will run a credit check on the owners of the mortgage loan correspondent company to determine eligibility and pricing for the Pennsylvania Mortgage Loan Correspondent Company 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 Pennsylvania Mortgage Loan Correspondent Bond Cost?
The Pennsylvania Mortgage Loan Correspondent Bond can cost anywhere between .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 the $100,000 bond requirement.
$100,000 Mortgage Loan Correspondent Bond Cost
Table 1.2
| Credit Score | Bond Cost (1 year) |
|---|---|
| 700+ | $750 |
| 650 – 699 | $1,000 |
| 625 – 649 | $1,250 |
| 600 – 624 | $1,500 |
| 550 – 599 | $4,000 |
| 500 – 549 | $5,000 |
How Does Pennsylvania Define “Mortgage Loan Correspondent Company?”
Pennsylvania statute 6102 defines a mortgage loan correspondent company as any business entity who originates and closes mortgage loans, in their own name, using funds provided by a wholesale table funder while simultaneously assigning the loan to a wholesale table funder.
How Do Mortgage Loan Correspondent Companies Apply for a License in Pennsylvania
Mortgage loan correspondent companies in Pennsylvania 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 Pennsylvania Mortgage Loan Correspondent 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 Pennsylvania Mortgage Loan Correspondent License must have a company net worth (assets – liabilities) of at least $100,000. Applicants must submit company financial statements verifying their net worth when submitting their license application.
Step 2 – Purchase a Surety Bond
Mortgage loan correspondent companies must purchase and maintain a surety bond (limits outlined in Table 1.1). Loan correspondent companies who accept advanced funds must also purchase an additional $100,000 surety bond.
Step 3 – Hire a Qualifying Individual
Mortgage loan correspondent companies must employ a qualified individual who is capable of handling the day to day operations of the business. The qualifying individual must be a licensed mortgage originator, or meet the licensing requirements of a mortgage originator, and be employed in a management position.
Step 4 – Complete the Pre-Licensure Education
At least one management level employee must complete the required pre-licensure education course which consists of a total of 20 hours. After completion of the training course, the employee must satisfy one of the following exam requirements:
-
- Passing results on both the National and Pennsylvania 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 5 – Request a NMLS Account
The Pennsylvania Mortgage Loan Correspondent 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 6 – Complete the Application
All Pennsylvania Mortgage Loan Correspondent License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Company financial statements indicating a net worth of at least $100,000
- Company business plan containing the following information:
- Marketing strategy
- Products
- Target markets
- Operating structure
- Company formation documents
- Organizational chart detailing the company’s ownership structure
- Tax certification
- Summary of the policies and procedures used to process consumer complaints
- The policies and procedures on how the company’s ability to repay analysis will be performed
Mortgage loan correspondent companies must pay a $1,600 fee when submitting their license application.
How Do Pennsylvania Mortgage Loan Correspondent Companies Renew Their License?
Mortgage loan correspondent companies can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Pennsylvania Mortgage Loan Correspondent License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Pennsylvania Mortgage Loan Correspondent Company License?
Pennsylvania does not require mortgage loan correspondent companies to purchase any form of liability insurance as a prerequisite to obtaining a business license. Mortgage loan correspondent companies must purchase and maintain a surety bond (limits outlined in Table 1.1). Loan correspondent companies who accept advanced funds must also purchase an additional $100,000 surety bond.
How Do Pennsylvania Mortgage Loan Correspondent Companies File Their Bond?
Mortgage loan correspondent companies 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 loan correspondent company. The surety company should include the following information on the bond form:
- Name, address, and phone number of entity/individual(s) buying the bond
- Surety company’s name, address, and phone number
- Bond amount
- Date the bond goes into effect
- Date the bond is signed
What Can Pennsylvania Mortgage Loan Correspondent Companies Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, mortgage loan correspondent companies in Pennsylvania must ensure that they follow all license 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
- Pay all required taxes and fees
- Provide all services that have been paid for
What Other Insurance Products Can Agents Offer Mortgage Loan Correspondent Companies in Pennsylvania?
Pennsylvania does not require mortgage loan correspondent companies 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 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 Pennsylvania Mortgage Loan Correspondent Company Customers?
The NMLS conveniently provides a public database to search for active mortgage loan correspondent companies in Pennsylvania. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
