Connecticut Mortgage Lender Bond: A Comprehensive Guide
This guide provides information for insurance agents to help mortgage lenders obtain Connecticut Mortgage Lender Bonds
At a Glance:
- Lowest Cost: $750 per year or $75 per month, based on the lender’s credit
- Bond Amount: Between $100,000 to $500,000 (more on this later)
- Who Needs it: All mortgage lenders seeking to obtain a license in the State of Connecticut
- Purpose: To ensure the public will receive compensation for any damages should the mortgage lender fail to comply with licensing law
- Who Regulates Mortgage Lenders in Connecticut: The Connecticut Department of Banking
*Mortgage lenders who also act as servicers will need to purchase an additional $100,000 surety bond (per branch location) and a fidelity bond
Background
Connecticut Statute 36a-486 requires all mortgage lenders operating in the state to obtain a license with the Department of Banking. The Connecticut legislature enacted the licensing laws and regulations to ensure that mortgage lenders engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, mortgage lenders must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Connecticut Mortgage Lender Bond?
Connecticut requires mortgage 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 lender fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the lender breaks licensing laws.
How Can an Insurance Agent Obtain a Connecticut Mortgage Lender Surety Bond?
BondExchange makes obtaining a Connecticut Mortgage 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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How is the Bond Amount Determined?
The limit on the Connecticut Mortgage Lender Bond is determined by the dollar amount of loans originated between July 1 to June 31 of the preceding financial year. The below table illustrates the required limits on the Connecticut Mortgage Lender Bond:
| Dollar Amount of Loand Originated | Bond Amount |
|---|---|
| Less than $30 million | $100,000 |
| $30 million but less than $100 million | $200,000 |
| $100 million but less than $250 million | $300,000 |
| $250 million or more | $500,000 |
Is a Credit Check Required for the Connecticut Mortgage Lender Bond?
Surety companies will run a credit check on the mortgage lender to determine eligibility and pricing for the Connecticut Mortgage Lender bond. Lender’s with excellent credit and work experience can expect to receive the best rates. Lender’s 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 lender’s credit.
How Much Does the Connecticut Mortgage Lender Bond Cost?
The Connecticut Mortgage Lender 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 $100,000 bond requirement.
$100,000 Mortgage Lender Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 700+ | $750 | $75 |
| 650 – 699 | $1,000 | $100 |
| 625 – 649 | $1,250 | $125 |
| 600 – 624 | $1,500 | $150 |
| 550 – 599 | $3,000 | $300 |
| 500 – 549 | $5,000 | $500 |
*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 Connecticut Define “Mortgage Lender?”
To paraphrase Connecticut Statute 36a-485, a mortgage lender is any individual or business entity who makes residential mortgage loans in their own name using their own funding or through funds obtained from a warehouse agreement, table funding agreement etc.
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 Lenders Apply for a License in Connecticut?
Mortgage Lenders in Connecticut 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 Connecticut Mortgage Lender 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 Connecticut Mortgage Lender License must first amass a tangible net worth (assets – liabilities) of at least $250,000. Lenders must submit a completed financial statement verifying their net worth when submitting their license application.
Step 2 – Hire a Qualifying Individual
Mortgage lenders must employ a qualifying individual who is responsible for running the day to day operations of the lending company. Qualifying individuals are subject to both background and credit checks, and must satisfy the following criteria:
-
- Be licensed as a mortgage loan originator with Connecticut
- Hold physical employment at the main office location
- Have at least three years of experience in the mortgage business, within the five years immediately preceding the application
- Reside within 100 miles of the main office or show capability of full time supervision
Qualifying individuals must submit a work experience form verifying their experience.
Step 3 – Purchase a Surety Bond
Mortgage lenders must purchase and maintain a surety bond (limits outlined in the previous section)
*Mortgage lenders who also act as servicers will need to purchase an additional $100,000 surety bond (per branch location) and a fidelity bond
Step 4 – Purchase Insurance (Servicers Only)
Mortgage lenders who also act as servicers will need to purchase errors and omissions insurance (and fidelity bond coverage) in the following amounts:
| Coverage Required | Amount of Residential Mortgage Loans Serviced |
|---|---|
| $300,000 | $100 million or less |
| Plus 0.15% | Of the next $400 million |
| Plus 0.125% | Of the next $500 million |
| Plus 0.1% | Of the amount over $1 billion |
Step 5 – Request NMLS Account
The Connecticut Mortgage Lender 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 Connecticut Mortgage Lender applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
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- Financial statements indicating a tangible net worth of at least $250,000
- The following company contacts:
- Primary Company Contact
- Accounting
- Exam Billing
- Licensing
- Consumer Complaint (Public)
- Exam Delivery
- Litigation
- Consumer Complaint (Regulator)
- Legal
- Pre-Exam Contact
- Company formation documents
Mortgage lenders must pay the following fees when submitting their license application
-
- $1,000 registration fee
- $100 NMLS processing fee
- $36.25 background check fee (per person)
- $15 credit report fee (per person)
How Do Connecticut Mortgage Lenders Renew Their License?
Mortgage Lenders can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Connecticut Mortgage Lender License expires on December 31 of each year and must be renewed before the expiration date
What Are the Insurance Requirements for the Connecticut Mortgage Lender License?
The State of Connecticut requires mortgage lenders who also act as servicers to obtain errors and omissions insurance (limits outlined above). Mortgage lenders must purchase and maintain a surety bond (limits outlined in the previous section). Additionally, mortgage lenders who also act as servicers will need to purchase an additional $100,000 surety bond (per branch location) and a fidelity bond.
How Do Connecticut Mortgage Lenders File Their Bond?
Mortgage Lenders should submit the completed bond form, including the power of attorney, electronically through the NMLS. Additionally, lenders must mail their completed bond form to the following address:
Department of Banking
260 Constitution Plaza
Hartford CT 06103-1800
The mortgage lender surety bond requires signatures from both the surety company that issues the bond and a representative from the lending company. The surety company should include the following information on the bond form:
- Legal name and state/county of entity/individual(s) buying the bond
- Surety company’s name and state/county
- License type (mortgage lender)
- Date the bond is signed
- Witness signatures for both the principal and surety company
What Can Connecticut Mortgage Lenders Do to Avoid Claims Against Their Bond?
In order to avoid claims made against their bond, mortgage lenders in Connecticut must follow all license regulations in the state. Including some of the most important issues below that tend to cause claims:
- Faithfully account for all funds received from borrowers
- Honor all written agreements made with borrowers
What Other Insurance Products Can Agents Offer Mortgage Lenders in Connecticut?
Connecticut requires mortgage lenders who also act as servicers to obtain 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 Connecticut Mortgage Lender Customers?
The NMLS conveniently provides a public database to search for active mortgage lenders in Connecticut. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.