Arizona Mortgage Broker Bond: A Comprehensive Guide
This guide provides information for insurance agents to help mortgage brokers obtain Arizona Mortgage Broker Bonds
For information on the Arizona Commercial Mortgage Broker Bond, click here
At a Glance:
- Lowest Cost: $100 per year or $10 per month, based on the mortgage broker’s credit
- Bond Amount:
- $10,000 if the broker’s investors are solely institutional investors
- $15,000 if the broker’s investors are not solely institutional investors
- Who Needs It: All individuals and business entities seeking to obtain a mortgage broker license in the State of Arizona
- Purpose: To ensure the public will receive compensation for any damages should the mortgage broker fail to comply with licensing law
- Who Regulates Mortgage Brokers in Arizona: The Arizona Department of Insurance and Financial Institutions
Background
Arizona Statute 6-903 requires mortgage brokers 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 brokers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, brokers must purchase and maintain either a $10,000 or $15,000 mortgage broker surety bond to be eligible for licensure.
What is the Purpose of the Arizona Mortgage Broker Bond?
Arizona requires brokers to purchase the Mortgage Broker Bond as part of the application process to obtain a mortgage broker license. The bond ensures that the public will receive compensation for financial harm if the broker fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the broker breaks licensing laws.
How Can an Insurance Agent Obtain an Arizona Mortgage Broker Surety Bond?
BondExchange makes obtaining an Arizona Mortgage Broker 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 Broker Bond?
Surety companies will run a credit check on the mortgage broker to determine eligibility and pricing for the Arizona Mortgage Broker bond. Brokers with excellent credit and work experience can expect to receive the best rates. Brokers 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 broker’s credit.
How Much Does the Arizona Mortgage Broker Bond Cost?
The Arizona Mortgage Broker 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 $15,000 bond requirement.
$15,000 Mortgage Broker Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 700+ | $100 | $10 |
| 650 – 699 | $150 | $15 |
| 625 – 649 | $187.50 | $188 |
| 600 – 624 | $282 | $29 |
| 550 – 599 | $600 | $60 |
| 500 – 549 | $750 | $75 |
*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 Broker”?
Arizona Statute 6-901 defines a mortgage broker as any individual or business entity “who for compensation or in the expectation of compensation either directly or indirectly makes, negotiates or offers to make or negotiate a mortgage loan.”
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 Apply for a License in Arizona?
Brokers in Arizona must navigate several steps to secure their mortgage broker license. Below are the general guidelines, but brokers should refer to the NMLS’s application guidelines for details on the process.
License Period – The Arizona Mortgage Broker License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Meet the Experience Requirements
Mortgage brokers must employ a “qualified individual” who has the necessary experience and is capable of handling the day to day operations of the broker’s business. Qualified individuals must have at least three years of work experience in the mortgage business or a related field and must have completed the following requirements:
-
- A 24-hour course of study
- Successfully passed a mortgage broker test
Step 2 – Purchase a Surety Bond
Mortgage brokers must purchase and maintain a mortgage broker surety bond with the following limit:
-
- $10,000 if the broker’s investors are solely institutional investors
- $15,000 if the broker’s investors are not solely institutional investors
Step 3 – Request an NMLS Account
The Arizona Mortgage Broker 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 4 – Complete the Application
All Arizona Mortgage Broker License applications can be completed online through the NMLS. Completed applications will include the following items:
-
- Unaudited financial statements indicating the broker’s company is solvent
- Personal Financial Statement (sole proprietors only)
- Documents verifying the qualified individual’s work experience
- 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 ownership structure of the company
- FBI background check authorization
Step 5 – Pay Fees
Applicants for the Arizona Mortgage Broker License must pay the following fees when submitting their license application:
-
- $500 application fee
- $100 NMLS processing fee
- $36.25 background check fee
- A licensing fee dependent on the month the license is issued:
| Month the License is Issued | Licensing Fee |
|---|---|
| Jan, Feb, Mar | $250 |
| Apr, May, Jun | $187.50 |
| Jul, Aug, Sep | $125 |
| Oct | $62.50 |
| Nov, Dec | $312.50 |
How Do Arizona Mortgage Brokers Renew Their License?
Mortgage Brokers 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 Broker 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 Broker License?
The State of Arizona does not require mortgage brokers to obtain any form of liability insurance as a prerequisite to obtaining a Mortgage Broker License. Brokers must purchase and maintain a mortgage broker surety bond with the following limits:
- $10,000 if the broker’s investors are solely institutional investors
- $15,000 if the broker’s investors are not solely institutional investors
How Do Arizona Mortgage Brokers File Their Bond?
Mortgage brokers should submit the completed bond form, including the power of attorney, electronically through the NMLS. The mortgage broker surety bond requires signatures from both the surety company that issues the bond and the mortgage broker. 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 broker)
- Date the bond goes into effect
What Can Businesses Do to Avoid Claims Against the Arizona Mortgage Broker Bond?
To avoid claims on the Mortgage Broker 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 Brokers in Arizona?
Arizona does not require mortgage brokers 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 Broker Customers?
Arizona conveniently provides a public database to search for active mortgage brokers 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.