Colorado Mortgage Loan Originator Bond: A Comprehensive Guide

March 29, 2021

Colorado Mortgage Loan Originator Bond

This guide provides information for insurance agents to help mortgage loan originators obtain Colorado Mortgage Loan Originator Bonds

At a Glance:

  • Average Cost: Between 0.75% to 5% of the bond amount per year based on the mortgage loan originator’s credit
  • Bond Amount: 
    • $25,000 for individual license applicants
    • $100,000 for group license applicants of 20 licenses or less
    • $200,000 for group licenses of more than 20 licenses
  • Who Needs It: All individuals seeking to obtain a mortgage loan originator license in the State of Colorado
  • Purpose: To ensure the public will receive compensation for any damages should the mortgage loan originator fail to comply with licensing law
  • Who Regulates Mortgage loan Originators in Colorado: The Colorado Division of Real Estate

Background

Colorado Statute 12-61-903 requires all mortgage loan originators operating in the state to obtain a license with the Colorado Division of Real Estate. The Colorado legislature enacted the licensing laws and regulations to ensure that mortgage loan originators engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, mortgage loan originators must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the Colorado Mortgage Loan Originator Bond?

Colorado requires mortgage loan originators to purchase a surety bond as part of the application process to obtain a professional license. The bond ensures that the public will receive compensation for financial harm if the mortgage loan originator fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the mortgage loan originator breaks licensing laws.

 

Colorado Mortgage Loan Originator Bond Form

Colorado Mortgage Loan Originator Bond Form

How Can an Insurance Agent Obtain a Colorado Mortgage Loan Originator Surety Bond? 

BondExchange makes obtaining a Colorado Mortgage Loan Originator 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 Colorado Mortgage Loan Originator Bond?

Surety companies will run a credit check on the owners of the mortgage loan originator to determine eligibility and pricing for the Colorado Money Transmitter bond. Applicants with excellent credit and work experience can expect to receive the best rates. Applicants 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 applicant’s credit.

How Much Does the Colorado Mortgage Loan Originator Bond Cost?

The Colorado Mortgage Loan Originator surety 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 $25,000 bond requirement.

$25,000 Mortgage Loan Originator Bond Cost

Credit Score Bond Cost (1 year)
700+ $187.50
650 – 699 $250
625 – 649 $312.50
600 – 624 $470
550 – 599 $1,000
450 – 549 $1,250

*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 Colorado Define “Mortgage Loan Originator?”

Colorado Statute 12-61-902 defines a mortgage loan originator as any individual who performs  one or both of the following services:

  • Takes a residential mortgage loan application
  • Offers or negotiates the terms of a residential mortgage loan

How do Mortgage Loan Originators  Apply for a License in Colorado?

Mortgage Loan Originators in Colorado 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 – The Colorado Mortgage Loan Originator License expires on December 31 of each year and must be renewed before the expiration date

Step 1 – Complete the Pre-Licensure Training

Mortgage loan originators must complete 20 hours of training, conducted by an approved course provider, prior to submitting their exam application.

Step 2 – Pass the Exam

Once they have completed the 20 hours of training, all license applicants must pass the National SAFE MLO examination

Step 3 – Obtain a Company Sponsorship

Mortgage loan originators are required to obtain a company sponsorship of their license from their employer. Companies can learn how to sponsor their employees here.

Step 4 – Purchase a Surety Bond

Mortgage loan originators must purchase and maintain a surety bond with the following limits:

    • $25,000 for individual license applicants
    • $100,000 for group license applicants of 20 licenses or less
    • $200,000 for group licenses of more than 20 licenses

Step 5 – Purchase Insurance

Mortgage loan originators must purchase errors and omissions (E&O) insurance with the following minimum limits:

    • $100,000 minimum coverage
    • $300,000 minimum annual aggregate limit
    • The deductible may not be greater than $1,000 ($20,000 for policies that insure reverse mortgages)

Step 6 – Request a NMLS Account

The Colorado Mortgage Loan Originator 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 7 – Complete the Application

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

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

    • $25 processing fee
    • $15 credit report fee
    • $36.25 background check fee
    • $39.50 state background check fee
    • $25 license fee

Additionally, mortgage loan originators must submit their license application online with the Colorado Division of Real Estate within 24 hours of submitting their license application through the NMLS.

How Do Colorado Mortgage Loan Originators Renew Their License?

Mortgage loan originators can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. Mortgage loan originators must satisfy the continuing education requirements each renewal period. The Colorado Mortgage Loan Originator License expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Colorado Mortgage Loan Originator License?

The State of Colorado requires mortgage loan originators to purchase errors and omissions insurance. Mortgage loan originators must purchase and maintain a mortgage loan originator surety bond.

How Do Colorado Mortgage Loan Originators File Their Bond?

Mortgage loan originators should submit the completed bond form, including the power of attorney, electronically through the NMLS. The mortgage loan originator surety bond requires signatures from both the surety company that issues the bond and the mortgage loan originator. 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
  • Date the bond goes into effect
  • Date the bond is signed

What Can Mortgage Loan Originators Do to Avoid Claims Against Their Bond?

To avoid claims on the Mortgage Loan Originator Bond, mortgage loan originators must ensure to never engage in any acts of fraud when servicing their customers.

What Other Insurance Products Can Agents Offer Mortgage Loan Originators in Colorado?

Colorado requires mortgage loan originators to purchase errors and omissions insurance. Bonds are our only business at BondExchange, so we do not issue errors and omissions 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 Colorado Mortgage Loan Originator Customers?

The NMLS conveniently provides a public database to search for active mortgage loan originators in Colorado. 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.

2021-03-30T14:13:14+00:00

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