Pennsylvania Partially Exempt Mortgage Company Bond: A Comprehensive Guide
August 19, 2021
This guide provides information for insurance agents to help their customers obtain a Pennsylvania Partially Exempt Mortgage Company Bond
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 |
- Who Needs it: All Pennsylvania mortgage companies who are exempt from licensure but who employ mortgage originators
- Purpose: To ensure the public will receive compensation for any damages should the mortgage company violate registration law
- Who Regulates Partially Exempt Mortgage Companies In Pennsylvania: The Pennsylvania Department of Banking and Securities
Background
The Pennsylvania Department of Banking and Securities requires all companies exempt from licensure under the Mortgage Licensing Act, but who employ mortgage originators, to obtain a registration through the Nationwide Multistate Licensing System (NMLS). The Pennsylvania legislature enacted the registration laws and regulations to ensure that exempt mortgage companies engage in ethical business practices. In order to provide financial security for the enforcement of the registration law, exempt mortgage companies who employ mortgage originators must purchase and maintain a surety bond to be eligible for registration.
What is the Purpose of the Pennsylvania Partially Exempt Mortgage Company Bond?
Pennsylvania requires exempt mortgage companies who employ mortgage originators 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 company’s mortgage originator employees fail to comply with the regulations set forth in the Pennsylvania Mortgage Licensing Act. Specifically, the bond protects the public in the event mortgage originators engage in any acts of fraud or breach any contracts made with consumers. In short, the bond is a type of insurance that protects the public if the company’s mortgage originator employees act unethically.
How Can an Insurance Agent Obtain a Pennsylvania Partially Exempt Mortgage Company Surety Bond?
BondExchange makes obtaining a Pennsylvania Partially Exempt Mortgage Company Bond easy. Simply login to your account and use our keyword search to find the “exempt” 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 Pennsylvania Mortgage Consumer Discount Company Bond?
Surety companies will run a credit check on the owners of the mortgage company to determine eligibility and pricing for the Pennsylvania Partially Exempt Mortgage 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 Partially Exempt Mortgage Company Bond Cost?
The Pennsylvania Partially Exempt Mortgage Company 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 a $100,000 bond requirement.
$100,000 Partially Exempt Mortgage Company 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 |
Who Needs to Obtain a Registration?
The following entities are exempt from licensure under the Mortgage Licensing Act and must obtain a registration if they employ mortgage originators:
- Affiliates of banking or government chartered credit institutions
- Subsidiaries of credit unions (exempt from bonding requirements but still subject to registration)
- Consumer discount companies
- Nonprofit organizations and their employees
- Installment sellers of, or holders of installment sales contracts
- Non-originating entities deemed be be engaged in the mortgage loan business
How Do Partially Exempt Mortgage Companies Apply for a Registration in Pennsylvania
Partially exempt mortgage companies in Pennsylvania 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 Pennsylvania Partially Exempt Mortgage Company Registration expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Registration applicants must purchase and maintain a surety bond (limits outlined in Table 1.1)
Step 2 – Hire a Qualifying Individual
Exempt mortgage companies applying for registration must employ a qualified individual who is capable of handling the day to day operations of the mortgage 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 3 – Request a NMLS Account
The Pennsylvania Partially Exempt Mortgage Company Registration application is submitted electronically through the NMLS. To submit a registration application, applicants must first request to obtain an NMLS account.
Step 4 – Complete the Application
All Pennsylvania Partially Exempt Mortgage Company Registration applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Company financial statements
- Service of process form
- 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
Exempt mortgage companies must pay a $100 fee when renewing their registration.
How Do Pennsylvania Exempt Mortgage Companies Renew Their Registration?
Exempt mortgage companies can renew their registration online through the NMLS. Registration holders need to simply login to their account to access their renewal application. The Pennsylvania Partially Exempt Mortgage Company Registration expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Pennsylvania Partially Exempt Mortgage Company Registration?
Pennsylvania does not require exempt mortgage companies to purchase any form of liability insurance as a prerequisite to obtaining a business registration. Registration applicants must purchase and maintain a surety bond (limits outlined in Table 1.1).
How Do Pennsylvania Exempt Mortgage Companies File Their Bond?
Exempt mortgage 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 mortgage 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 Partially Exempt Mortgage Companies Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, exempt mortgage companies in Pennsylvania must ensure that their mortgage originator employees 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
What Other Insurance Products Can Agents Offer Exempt Mortgage Companies in Pennsylvania?
Pennsylvania does not require exempt mortgage companies to purchase any form of liability insurance as a prerequisite to obtaining a business registration. 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 Partially Exempt Mortgage Company Customers?
The NMLS conveniently provides a public database to search for active partially exempt mortgage 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.
