Virginia Mortgage Lender Bond: A Comprehensive Guide

August 31, 2021

This guide provides information for insurance agents to help their customers obtain Virginia Mortgage Lender Bonds

At a Glance:

• Average Cost: Between $375 to $2,500 per year based on the applicant’s credit
• Bond Amount: $50,000
• Who Needs it: All mortgage lenders operating in Virginia
• 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 Virginia: The Virginia Bureau Financial Institutions

Background

Virginia statute 6.2-1601 requires all mortgage lenders operating in the state to obtain a license with the Bureau of Financial Institutions. The Virginia legislature enacted the licensing laws and regulations to ensure that mortgage lenders engage in ethical business practices. To provide financial security for the enforcement of the licensing law, lenders must purchase and maintain a $50,000 surety bond to be eligible for licensure.

What is the Purpose of the Virginia Mortgage Lender Bond?

Virginia 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 lender fails to comply with the regulations outlined in Virginia statutes Title 6.2 Chapter 16. 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 lender breaks licensing laws.

Do Licensed Mortgage Brokers Need to Purchase an Additional Bond?

No, licensed mortgage brokers seeking to obtain their lender license do not need to purchase an additional surety bond. However, they will need to obtain a rider on their bond increasing the limit to $50,000. Contact BondExchange for help accomplishing this. The same is also true in the reverse, as licensed mortgage lenders will not need to purchase a new bond to obtain their broker license.

How Can an Insurance Agent Obtain a Virginia Mortgage Lender Surety Bond?

BondExchange makes obtaining a Virginia 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.

Is a Credit Check Required for the Virginia Mortgage Lender Bond?

Surety companies will run a credit check on the owners of the lending company to determine eligibility and pricing for the Virginia Mortgage Lender Bond. Owner’s with excellent credit and work experience can expect to receive the best rates. Owner’s 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 Virginia Mortgage Lender Bond Cost?

The Virginia Mortgage Lender Surety Bond can cost anywhere between $375 to $2,500 per year. Insurance companies determine the rate based on several factors including your customer’s credit score and experience. The chart below offers a quick reference for the approximate bond cost on the $50,000 bond requirement.

$50,000 Mortgage Lender Bond Cost

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

How Does Virginia Define “Mortgage Lender?”

Virginia statute 6.2-1600 defines a mortgage lender as any business entity who makes or originates mortgage loans.

How Do Mortgage Lenders Apply for a License in Virginia?

Mortgage Lenders in Virginia 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 Virginia Lender license expires on December 31 of each year and must be renewed before the expiration date

Step 1 – Purchase a Surety Bond

Mortgage lenders must purchase and maintain a $50,000 surety bond

Step 2 – Request an NMLS Account

The Virginia 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 3 – Complete the Application

All Virginia Mortgage Lender License applications can be completed online through the NMLS. Applicants must complete entire the application, and submit the following items:

• • Company financial statements
  • Primary company and consumer complaint contact information
  • Disclosure questions
  • Detailed company business plan
  • Certificate of Good Standing
  • Company management and organizational charts
  • Company formation documents

The following items must be mailed to the Bureau of Financial Institutions

• • Criminal history records check
  • Personal financial statements
  • Principal financial statements (if applicable)
  • Three business references
  • Bank reference 
  • Evidence that the company has at least $200,000 available funds

The Bureau of Financial Institutions mailing address is:

Virginia Bureau of Financial Institutions
MLO Licensing Unit
P.O. Box 640
Richmond, Virginia 23218-0640

Mortgage lenders must pay the following fees when submitting their license application:

• • $500 application fee
  • $100 NMLS processing fee
  • $36.25 background check fee (per person)
  • $27 fee per control person without a background check
  • $15 credit report fee (per person)

How Do Virginia 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 Virginia Lender license expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Virginia Lender License?

Virginia does not require mortgage lenders to obtain any form of liability insurance as a prerequisite to obtaining a business license. Mortgage lenders must purchase and maintain a $50,000 surety bond.

How Do Virginia Mortgage Lenders File Their Bond?

Mortgage lenders should submit the completed bond form, including the power of attorney, electronically through the NMLS. Lenders will also need to mail their completed bond form to the following address:

Virginia Bureau of Financial Institutions
MLO Licensing Unit
P.O. Box 640
Richmond, Virginia 23218-0640

The mortgage lender surety bond requires signatures from both the surety company that issues the bond and a representative from the lending company. The surety company should include the following information on the bond form:

• Legal name and number of entity/individual(s) buying the bond
• Surety company’s name
• Bond amount
• Date the bond is signed

What Can Virginia Mortgage Lenders Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, mortgage lenders in Virginia must 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 Mortgage Lenders in Virginia?

Virginia does not require mortgage lenders to obtain 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 Virginia Mortgage Lender Customers?

The NMLS conveniently provides a public database to search for active mortgage lenders in Virginia. The database can be accessed here. Contact BondExchange for help developing a marketing piece. Agents can also leverage our print-mail relationships for discounted mailing services.