DC Mortgage Broker/Lender Bond: A Comprehensive Guide
This guide provides information for insurance agents to help mortgage brokers and lenders obtain DC Mortgage Broker/Lender Bonds
At a Glance:
- Lowest Cost: 0.5% of the bond amount per year based on the broker or lender’s credit
- Bond Amount: Based on the broker or lender’s total volume of loans
Table 1.1
| Total Dollar Volume of Loanes | Bond Amount (per branch location) |
|---|---|
| $ 1 million or less | $12,500 |
| More than $1 million but less than $2 million | $17,500 |
| More than $2 million but less than $3 million | $25,000 |
| More than $3 million | $50,000 |
*Applicants may choose to purchase a blanket surety bond with a limit of $200,000 to cover all branch locations
- Who Needs it: All mortgage brokers and lenders seeking to obtain a license in the District of Columbia
- Purpose: To ensure the public will receive compensation for any damages should the mortgage broker or lender fail to comply with licensing law
- Who Regulates Mortgage Brokers and Lenders in DC: The District of Columbia Department of Insurance, Securities, and Banking
Background
DC Statute 26-1103 requires all mortgage brokers and lenders operating in the district to obtain a license with the Department of Insurance, Securities and Banking. The DC legislature enacted the licensing laws and regulations to ensure that mortgage brokers and lenders engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, brokers and lenders must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the DC Mortgage Broker/Lender Bond?
DC requires mortgage brokers and 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 broker or lender fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the mortgage broker or lender breaks licensing laws.
How Can an Insurance Agent Obtain a DC Mortgage Broker/Lender Surety Bond?
BondExchange makes obtaining a DC Mortgage Broker/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? Gain access 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.
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Is a Credit Check Required for the DC Mortgage Broker/Lender Bond?
Surety companies will run a credit check on the mortgage brokerage or lending company to determine eligibility and pricing for the DC Mortgage Broker/Lender bond. Owner’s 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 DC Mortgage Broker/Lender Bond Cost?
The DC Mortgage Broker/Lender surety 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 $17,500 bond requirement.
$17,500 Mortgage Broker/Lender Bond Cost
Table 1.2
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 700+ | $100 | $10 |
| 650 – 699 | $175 | $18 |
| 625 – 649 | $219 | $22 |
| 600 – 624 | $329 | $33 |
| 550 – 599 | $700 | $70 |
| 500 – 549 | $875 | $88 |
*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 the District of Columbia Define “Mortgage Broker?”
To paraphrase DC Statute 26-1101, a mortgage broker is any individual or business entity who accepts an application for, solicits, or negotiates a mortgage loan either directly or indirectly.
How Does the District of Columbia Define “Mortgage Lender?”
DC Statute 26-1101 defines a mortgage lender as any individual or business entity who:
- Makes a mortgage loan to any person; or
- Engages in the business of servicing mortgage loans for others or collecting or otherwise receiving mortgage loan payments directly from borrowers for distribution to any other person.
BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.
How do Mortgage Brokers and Lenders Apply for a License in DC?
Mortgage brokers and lenders in DC must navigate several steps to secure their license. Below are the general guidelines, but license applicants should refer to the NMLS’s application guidelines for details on the process.
License Period – All DC Mortgage Broker and Lender Licenses expire on December 31 of each year and must be renewed before the expiration date
Step 1 – Determine the License Type
The District of Columbia requires mortgage brokers and lenders to obtain specific licenses corresponding to the nature in which their business operates. Below are the different types of DC Mortgage Broker and Lender Licenses:
-
- Mortgage Broker: For businesses who act solely as mortgage brokers
- Mortgage Lender: For businesses who act solely as mortgage lenders
- Dual License: For businesses who act as both mortgage brokers and lenders
Step 2 – Meet the Net Worth Requirements
Applicants for the DC Mortgage Broker or Lender Licenses must have a company net worth (assets – liabilities) of the following minimum limits (per branch location):
-
- $25,000 for mortgage brokers
- $200,000 for mortgage lenders
- $225,000 for dual license holders
Applicants must submit financial statements verifying their net worth when submitting their license application.
Step 3 – Purchase a Surety Bond
Mortgage brokers and lenders must purchase and maintain a surety bond (limits outlined in Table 1.1)
Step 4 – Request NMLS Account
All DC Mortgage License applications are 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 DC Mortgage License applications (see Step 1 for application forms) can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Financial statements
- Company formation documents
- A Certificate of Registration obtained from the DCRA
License applicants must pay an application fee in the following amount:
-
- $1,200 for mortgage brokers
- $1,300 for mortgage lenders
- $1,400 for dual license applicants
How Do DC Mortgage Brokers and Lenders Renew Their Licenses?
Mortgage brokers and lenders can renew their licenses online through the NMLS. License holders need to simply login to their account to access their renewal application. All DC Mortgage Broker and Lender Licenses expire on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the DC Mortgage Broker and Lender Licenses?
The District of Columbia does not require mortgage brokers and lenders to obtain any form of liability insurance as a prerequisite to obtaining a business license. Mortgage brokers and lenders must purchase and maintain a surety bond (limits outlined in Table 1.1)
How Do DC Mortgage Brokers and Lenders File Their Bond?
Mortgage brokers and 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:
- License type (mortgage lender/broker)
- Legal name and address of entity/individual(s) buying the bond
- Surety company’s name
- Bond amount
- Date the bond goes into effect
- Date the bond is signed
What Can DC Mortgage Brokers and Lenders Do to Avoid Claims Against Their Bond?
In order to avoid claims made against their bond, mortgage brokers and lenders in DC must follow all license regulations in the district. Including some of the most important issues below that tend to cause claims:
- Faithfully follow all written agreements with borrowers
- Account for all funds received
What Other Insurance Products Can Agents Offer Mortgage Brokers and Lenders in DC?
DC does not require mortgage brokers and lenders to purchase any form of liability insurance as a prerequisite to obtaining a 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 DC Mortgage Broker and Lender Customers?
The NMLS conveniently provides a public database to search for active mortgage brokers and lenders in DC. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
