New York Mortgage Banker Bond: A Comprehensive Guide

This guide provides information for insurance agents to help their customers obtain New York Mortgage Banker Bonds

At a Glance:

• Lowest Cost: 0.75% of the bond amount per year based on the applicant’s credit
• Bond Amount: Between $50,000 to $500,000 (more on this later)
• Who Needs it: All mortgage bankers operating in New York
• Purpose: To ensure the public will receive compensation for any damages should the mortgage banker violate licensing law
• Who Regulates Mortgage Bankers In New York: The New York Department of Financial Services

Background

New York statute 590 requires all mortgage bankers operating in the state to obtain a license with the Department of Financial Services. The New York legislature enacted the licensing laws and regulations to ensure that mortgage bankers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, mortgage bankers must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the New York Mortgage Banker Bond?

New York requires mortgage bankers 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 banker fails to comply with the regulations set forth in New York Banking Code article 12-D. Specifically, the bond protects the public in the event the mortgage banker 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 banker breaks licensing laws.

How Can an Insurance Agent Obtain a New York Mortgage Banker Surety Bond?

BondExchange makes obtaining a New York Mortgage Banker 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.

Not an agent? Then let us pair you with one!

Click the above image to find a BX Agent near you

How is the Bond Amount Determined?

New York statute 591 dictates that the limit on the mortgage banker bond be a minimum of $50,000. The statute also grants the Department of Financial Services the authority to increase the bond amount to a maximum of $500,000 if the mortgage banker accrues significant consumer complaint or engages in misconduct related to their license.

Is a Credit Check Required for the New York Mortgage Banker Bond?

Surety companies will run a credit check on the owners of the mortgage company to determine eligibility and pricing for the New York Mortgage Banker 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 New York Mortgage Banker Bond Cost?

The New York Mortgage Banker Bond can cost anywhere between 0.75% 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 $50,000 bond requirement.

$50,000 Mortgage Banker Bond Cost

How Does New York Define “Mortgage Banker?”

To paraphrase New York statute 590, a mortgage banker is any business entity who advances funds or issues commitments to make mortgage loans.

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 Bankers Apply For a License in New York?

Mortgage bankers in New York 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.

Registration Period – The New York Mortgage Banker 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 mortgage banker license must maintain a minimum company net worth (assets – liabilities) of at least $250,000. Mortgage bankers must submit financial statements verifying their net worth with their license application. Mortgage bankers must also maintain a minimum line of credit of $1 million.

Step 2 – Purchase a Surety Bond

Mortgage bankers must purchase and maintain both a surety bond with a minimum limit of $50,000

Step 3 – Purchase Insurance

Mortgage bankers must purchase workers’ compensation insurance coverage

Step 4 – Hire a Qualifying Individual

Mortgage bankers must employ a qualifying individual who is capable of handling the day-to-day operations of the mortgage banking company. The qualifying individual must have a minimum of five years of industry experience and be in a managerial position.

Step 5 – Request an NMLS Account

The New York Mortgage Banker 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 New York Mortgage Banker License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

• • Corporate financial statements
  • The following company contacts:
    • Primary
    • Primary consumer complaint
    • Accounting
    • Exam Billing
    • Licensing
    • Consumer Complaint (Public)
    • Exam Delivery
    • Litigation
    • Consumer Complaint (Regulator)
    • Legal
    • Pre-Exam Contact
  • Disclosure questions
  • Detailed company business plan
  • Company staffing and internal policies that address the following
    • Compliance program
    • Fair Lending Plan
    • AML/BSA Policy
  • Company formation documents
  • Company management and organizational charts
  • Letter of assurance, written on the company’s letterhead, proclaiming the company will comply with the net worth requirements
  • Personal financial statements for all company owners with a 10% stake or higher
  • Certificate of Good Standing
  • Word approval authorization certificate
  • Personal questionnaire for all control persons and the three most senior company executive officers
  • Resumes for all control persons, the three most senior company executives, and the qualifying individual
  • Litigation affidavit
  • Certification and affirmation
  • Corporate resolutions
  • Certificate of compliance
  • Leases for all company property
  • Website questionnaire

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

• • $3,000 investigation fee
  • $100 NMLS processing fee
  • $15 credit report fee (per person)

How Do New York Mortgage Bankers Renew Their License?

Mortgage bankers can renew their licenses online through the NMLS. License holders need to simply login to their account to access their renewal application. The New York Mortgage Banker License expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the New York Mortgage Banker License?

New York requires mortgage bankers to purchase workers’ compensation insurance as a prerequisite to obtaining a business license. Mortgage bankers must purchase and maintain both a surety bond with a minimum limit of $50,000.

How Do New York Mortgage Bankers File Their Bond?

Mortgage bankers 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 location of entity/individual(s) buying the bond
• Surety company’s name and location
• Bond amount
• Date the bond goes into effect
• Date the bond is signed

What Can New York Mortgage Bankers Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, mortgage bankers in New York 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
• Do not charge exorbitant fees

What Other Insurance Products Can Agents Offer Mortgage Bankers in New York?

New York requires mortgage bankers to purchase worker’s compensation insurance. Additionally, most reputable mortgage bankers will seek to purchase liability insurance as well. 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 New York Mortgage Banker Customers?

The NMLS conveniently provides a public database to search for active mortgage bankers in New York. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.