Illinois Residential Mortgage License Bond: A Comprehensive Guide

May 6, 2021

Illinois Residential Mortgage License Bond

This guide provides information for insurance agents to help their customers obtain Illinois Residential Mortgage License Bonds

At a Glance:

  • Average Cost: Between 0.75% to 5% of the bond amount per year based on the applicant’s credit
  • Bond Amount: Based upon Illinois residential mortgage loans brokered, funded, originated, serviced or purchased

Table 1.1

Loans Bond Amount
$0 – $5 million $25,000
Over $5 million to $20 million $50,000
Over $20 million to $50 million $75,000
Over $50 million to $100 million $100,000
Over $100 million $150,000

Mortgage professionals must also purchase a $100,000 fidelity bond when applying for a license

  • Who Needs it: All individuals and businesses seeking to obtain a residential mortgage license in Illinois
  • Purpose: To ensure the public will receive compensation for any damages should the mortgage professional fail to comply with licensing law
  • Who Regulates Mortgage Professionals in Illinois: The Illinois Department of Financial and Professional Regulation

Background

The Illinois Residential Mortgage License Act requires all residential mortgage professionals operating in the state to obtain a license with the Department of Financial and Professional Regulation. The Illinois legislature enacted the licensing laws and regulations to ensure that mortgage professionals engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, residential mortgage professionals must purchase and maintain both a business license surety bond and a $100,000 fidelity bond to be eligible for licensure.

What is the Purpose of the Illinois Residential Mortgage License Bond?

Illinois requires residential mortgage professionals to purchase both a business license and fidelity surety bond as part of the application process to obtain a business license. The bonds ensure that the public will receive compensation for financial harm if the mortgage professional fails to comply with the licensing regulations. In short, the bonds are a type of insurance that protects the public if the residential mortgage professional breaks licensing laws.

Illinois Residential Mortgage License Bond Form

Illinois Residential Mortgage License Bond Form

How Can an Insurance Agent Obtain an Illinois Residential Mortgage License  Surety Bond?

BondExchange makes obtaining an Illinois Residential Mortgage License 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 Illinois Residential Mortgage License Bond?

Surety companies will run a credit check on the owners of the residential mortgage company to determine eligibility and pricing for the Illinois Residential Mortgage License bond. Owner’s with excellent credit and work experience can expect to receive the best rates. Owners 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 owner’s credit.

How Much Does the Illinois Residential Mortgage License Bond Cost?

The Illinois Residential Mortgage License 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 Exempt Entity Processor Bond Cost

Credit Score Bond Cost (1 year)
700+ $188
650 – 699 $250
625 – 649 $313
600 – 624 $470
550 – 599 $1,000
450 – 499 $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 Much Does The Illinois Residential Mortgage Fidelity Bond Cost?

The cost of the $100,000 fidelity bond is determined on a case by case basis. Underwriters will examine your customer’s credit history, financial statements, and years of business experience when determining the premium rate. Contact BondExchange for more information regarding the cost of the $100,000 Illinois Residential Mortgage Fidelity Bond.

Who Needs to Purchase a Bond?

The Illinois Residential Mortgage License Act requires all individuals and businesses entities who perform one or more of the following services to purchase a surety bond:

  • Brokers residential mortgage loans
  • Funds residential mortgage loans
  • Originates residential mortgage loans
  • Services residential mortgage loans
  • Purchases residential mortgage loans

How do Residential Mortgage Professionals Apply for a License in Illinois?

Residential Mortgage Professionals in Illinois must navigate several steps to secure their license. Below are the general guidelines, but applicants should refer to the NMLS’s application guidelines for details on the process.

License Period – The Illinois Residential Mortgage 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 Illinois Residential Mortgage License must have a company net worth (assets – liabilities) of at least $50,000 for mortgage brokers with Illinois offices, and $150,000 for mortgage brokers and bankers without Illinois offices. Applicants must submit an audited financial statement, prepared by a CPA, verifying their net worth when submitting their license application.

Step 2 – Purchase Surety Bonds

Mortgage professionals must purchase and maintain both a $100,000 fidelity bond and a business license bond (limits outlined in Table 1.1)

Step 3 – Request a NMLS Account

The Illinois Residential Mortgage 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 Illinois Residential Mortgage License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

    • Audited company financial statements prepared by a CPA
    • Complete list of all company business activities
    • Bank account information for the company’s operating and/or trust account(s)
    • Company formation documents
    • Certificate of Good Standing issued by the Illinois Secretary of State
    • Exemption Agreement Form

Applicants for the Illinois Residential Mortgage License must pay a $2,800 license fee when submitting their application.

How Do Illinois Residential Mortgage Professionals Renew Their License?

Residential Mortgage Professionals can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Illinois Residential Mortgage License expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Illinois Residential Mortgage License?

The State of Illinois does not require residential mortgage professionals to obtain any form of liability insurance as a prerequisite to obtaining a business license. Mortgage professionals must purchase and maintain both a $100,000 fidelity bond and a business license bond (limits outlined in Table 1.1).

How Do Illinois Residential Mortgage Professionals File Their Bond?

Mortgage professionals should submit the completed bond form, including the power of attorney, electronically through the NMLS. The surety bond requires signatures from both the surety company that issues the bond and a representative from the mortgage company. 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
  • Date the bond is signed

What Can Illinois Residential Mortgage Professionals Do to Avoid Claims Against Their Bond?

In order to avoid claims made against their bond, residential mortgage professionals in Illinois must follow all license regulations in the state. Including some of the most important issues below that tend to cause claims:

  • Do not engage in any acts of fraud
  • Do not omit any information when assisting consumers

What Other Insurance Products Can Agents Offer Residential Mortgage Professionals in Illinois?

Illinois does not require mortgage professionals to purchase any form of liability insurance as a prerequisite to obtaining a license. 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 Illinois Residential Mortgage Professional Customers?

The NMLS conveniently provides a public database to search for active residential mortgage professionals in Illinois. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

2021-12-28T15:20:44-05:00