Arizona Mortgage Banker Bond: A Comprehensive Guide
This guide provides information for insurance agents to help mortgage bankers obtain Arizona Mortgage Banker Bonds
For information on how to obtain the Arizona Commercial Mortgage Banker Bond, click here
At a Glance:
- Lowest Cost: $100 per year or $10 per month, based on the mortgage banker’s credit
- Bond Amount:
- $25,000 if the banker’s investors are solely institutional investors
- If the banker’s investors are not solely institutional investors, then the bond amount is based on the total assets of the banker plus the unpaid balance of loans that it has contracted to service for others as of the end of the broker’s fiscal year:
Table 1.1
| Base | Bond Amount |
|---|---|
| Not over $1 million | $25,000 for the first $500,000 plus $5,000 for each $100,000 or fraction thereof over $500,000 |
| Over $1 million to $10 million | $50,000 plus $5,000 for each $1,800,000 or fraction thereof over $1,000,000 |
| Over $10 million to $100 million | $75,000 plus $5,000 for each $18,000,000 or fraction thereof over $10,000,000 |
| Over $100 million | $100,000 |
- Who Needs It: All individuals and business entities seeking to obtain a mortgage banker license in the State of Arizona
- Purpose: To ensure the public will receive compensation for any damages should the mortgage banker fail to comply with licensing law
- Who Regulates Mortgage Bankers in Arizona: The Arizona Department of Insurance and Financial Institutions
Background
Arizona Statute 6-973 requires mortgage bankers operating in the state to obtain a license with the Department of Insurance and Financial Institutions. The Arizona 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, bankers must purchase and maintain either a mortgage banker surety bond (limits outlined in Table 1.1) to be eligible for licensure.
What is the Purpose of the Arizona Mortgage Banker Bond?
Arizona requires bankers to purchase the Mortgage Banker Bond as part of the application process to obtain a mortgage banker license. The bond ensures that the public will receive compensation for financial harm if the banker fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the banker breaks licensing laws.
How Can an Insurance Agent Obtain an Arizona Mortgage Banker Surety Bond?
BondExchange makes obtaining an Arizona 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.
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Is a Credit Check Required for the Arizona Mortgage Banker Bond?
Surety companies will run a credit check on the mortgage banker to determine eligibility and pricing for the Arizona Mortgage Banker bond. Bankers with excellent credit and work experience can expect to receive the best rates. Bankers 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 banker’s credit.
How Much Does the Arizona Mortgage Banker Bond Cost?
The Arizona Mortgage Banker surety bond can cost anywhere between 0.5% to 5% of the bond amount per year. Monthly subscription options are also available. 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 $50,000 bond requirement.
$50,000 Mortgage Banker Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 700+ | $250 | $25 |
| 650 – 699 | $500 | $50 |
| 625 – 649 | $625 | $63 |
| 600 – 624 | $940 | $94 |
| 550 – 599 | $2,000 | $200 |
| 500 – 549 | $2,500 | $250 |
*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 Arizona Define “Mortgage Banker”?
To paraphrase Arizona Statute 6-941, a mortgage banker is any individual or business entity who makes or offers to make a mortgage loan either directly or indirectly.
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 Arizona?
Bankers in Arizona must navigate several steps to secure their mortgage banker license. Below are the general guidelines, but bankers should refer to the NMLS’s application guidelines for details on the process.
License Period – The Arizona 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 Arizona Mortgage Banker License must first amass a company net worth (assets – liabilities) of at least $100,000. Bankers must submit a current (6 months or less) CPA audited financial statement verifying their net worth when submitting their license application.
Step 2 – Meet the Experience Requirements
Mortgage bankers must employ a “qualified individual” who has the necessary experience and is capable of handling the day to day operations of the banker’s business. Qualified individuals must have at least three years of work experience in the mortgage business or a related field. Qualified individuals must also complete 12 hours of continuing education each renewal period.
Step 3 – Purchase a Surety Bond
Mortgage bankers must purchase and maintain a mortgage banker surety bond (limits outlined in Table 1.1)
Step 4 – Request an NMLS Account
The Arizona 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 5 – Complete the Application
All Arizona Mortgage Banker License applications can be completed online through the NMLS. Completed applications will include the following items:
-
- Audited financial statements indicating a company net worth of at least $100,000
- Personal Financial Statement (sole proprietors only)
- Documents verifying the qualified individual’s work experience
- FBI background check authorization
- Company formation documents
- A company business plan containing the following information:
- Marketing strategies
- Products
- Target markets
- The operating structure that the applicant intends to employ
- A management chart detailing the leadership hierarchy of the company
- An ownership chart detailing the amount ownership structure of the company
Step 6 – Pay Fees
Applicants for the Arizona Mortgage Banker License must pay the following fees when submitting their license application:
-
- $1,000 application fee
- $100 NMLS processing fee
- $36.25 background check fee
- A licensing fee dependent on the month the license is issued:
Table 1.3
| Month the License is Issued | Licensing Fee |
|---|---|
| Jan, Feb, Mar | $750 |
| Apr, May, Jun | $562.50 |
| Jul, Aug, Sep | $375 |
| Oct | $187.50 |
| Nov, Dec | $937.50 |
How Do Arizona Mortgage Bankers Renew Their License?
Mortgage Bankers can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Arizona 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 Arizona Mortgage Banker License?
The State of Arizona does not require mortgage bankers to obtain any form of liability insurance as a prerequisite to obtaining a Mortgage Banker License. Bankers must purchase and maintain a mortgage banker surety bond (limits outlined in Table 1.1)
How Do Arizona Mortgage Bankers File Their Bond?
Mortgage bankers should submit the completed bond form, including the power of attorney, electronically through the NMLS. The mortgage banker surety bond requires signatures from both the surety company that issues the bond and the mortgage banker. The surety company should include the following information on the bond form:
- Legal name of entity/individual(s) buying the bond
- Surety company’s name
- Bond amount
- License Type (mortgage banker)
- Date the bond goes into effect
What Can Businesses Do to Avoid Claims Against the Arizona Mortgage Banker Bond?
To avoid claims on the Commercial Mortgage Banker Bond, businesses must follow all license regulations in the state, and ensure that they do not engage in, or allow any representatives of their business to engage in, any acts of fraud.
What Other Insurance Products Can Agents Offer Mortgage Bankers in Arizona?
Arizona does not require mortgage bankers to obtain any form of liability insurance. 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 Arizona Mortgage Banker Customers?
Arizona conveniently provides a public database to search for active mortgage bankers in the state. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.