Connecticut Mortgage Servicer Bond: A Comprehensive Guide
This guide provides information for insurance agents to help mortgage servicers obtain Connecticut Mortgage Servicer Bonds
At a Glance:
- Lowest Cost: 0.75% of the bond amount per year based on the servicer’s credit
- Bond Amount:
- Business license bond: $100,000 per branch location
- Fidelity bond: Based on the amount of loans serviced (more on this later)
- Who Needs it: All mortgage servicers seeking to obtain a license in the State of Connecticut
- Purpose: To ensure the public will receive compensation for any damages should the mortgage servicer fail to comply with licensing law
- Who Regulates Mortgage Servicers in Connecticut: The Connecticut Department of Banking
Background
Connecticut Statute 36a-718 requires all mortgage servicers 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 servicers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, mortgage servicers must purchase and maintain both a business license and fidelity surety bond to be eligible for licensure.
What is the Purpose of the Connecticut Mortgage Servicer Bond?
Connecticut requires mortgage servicers to purchase both a business license and fidelity surety bond as part of the application process to obtain a license. The bond ensures that the public will receive compensation for financial harm if the servicer fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the servicer breaks licensing laws.
How Can an Insurance Agent Obtain a Connecticut Mortgage Servicer Surety Bond?
BondExchange makes obtaining a Connecticut Mortgage Servicer Bond easy. Simply login to your account and use our keyword search to find the “servicer” 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 Fidelity Bond Amount Determined?
The limit on the Connecticut Mortgage Servicer Fidelity Bond is determined by the total dollar amount of residential loans serviced. The below table illustrates the required limits on the Connecticut Mortgage Servicer Fidelity Bond:
| 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 |
Is a Credit Check Required for the Connecticut Mortgage Servicer Bond?
Surety companies will run a credit check on the owners of the mortgage servicing company to determine eligibility and pricing for the Connecticut Mortgage Servicer bond. Servicer’s with excellent credit and work experience can expect to receive the best rates. Servicer’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 servicer’s credit.
How Much Does the Connecticut Mortgage Servicer Bond Cost?
The Connecticut Mortgage Servicer 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 Servicer 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.
For information regarding the pricing of the Fidelity Bond, contact BondExchange at (800) 438-1162.
How Does Connecticut Define “Mortgage Servicer?”
To paraphrase Connecticut Statute 36a-715, a mortgage servicer is any business entity who collects loan payments from a borrower and handles the day-to-day administrative tasks of handling the borrower’s 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 Servicers Apply for a License in Connecticut?
Mortgage Servicers 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 Servicer License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Hire a Qualifying Individual
Mortgage servicers 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:
-
- 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
Step 2 – Purchase Surety Bonds
Mortgage servicers must purchase and maintain a $100,000 business license surety bond (per branch location) and a fidelity bond (limits outlined in the previous section).
Step 3 – Purchase Insurance
Mortgage 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 4 – Request NMLS Account
The Connecticut Mortgage Servicer 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 Connecticut Mortgage Servicer License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- A company financial statement prepared within the previous 12 months
- 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 servers 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 Servicers Renew Their License?
Mortgage Servicers can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Connecticut Servicer 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 Servicer License?
The State of Connecticut requires mortgage servicers to obtain errors and omissions insurance (limits outlined above). Additionally, mortgage servicers will need to purchase an additional $100,000 surety bond (per branch location) and a fidelity bond.
How Do Connecticut Mortgage Servicers File Their Bond?
Mortgage servicers should submit the completed bond form, including the power of attorney, electronically through the NMLS. Additionally, servicers must mail their completed bond form to the following address:
Department of Banking
260 Constitution Plaza
Hartford CT 06103-1800
The mortgage servicer surety bond requires signatures from both the surety company that issues the bond and a representative from the servicing 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
- Bond amount
- Date the bond is signed
- Witness signatures for both the principal and surety company
What Can Connecticut Mortgage Servicers Do to Avoid Claims Against Their Bond?
In order to avoid claims made against their bond, mortgage servicers 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 Servicers in Connecticut?
Connecticut requires mortgage 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 Servicer Customers?
The NMLS conveniently provides a public database to search for active mortgage servicers 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.