Iowa Closing Agent Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain an Iowa Closing Agent bond.
At a Glance:
- Lowest Cost: $100 per year or $10 a month
- Bond Amount: $25,000
- Who Needs It: All closing agents operating in Iowa
- Purpose: To protect the public from financial harm if the closing agent commits fraud or engages in unfair business practices
- Who Regulates Closing Agents in Iowa: The Iowa Department of Insurance and Financial Services
Background
Iowa Code 535B.4 requires all closing agents operating in the state to obtain a license from the Iowa Department of Insurance and Financial Services. The Iowa Legislature enacted the licensing requirement to ensure that closing agents do not engage in unethical business practices. To provide financial security for the enforcement of the licensing law, closing agents must purchase and maintain a $25,000 surety bond to be eligible for licensure.
What Is the Purpose of Iowa Closing Agent Bond?
Iowa requires closing agents to purchase a surety bond as part of the application process to obtain a license. The bond ensures that restitution is available to any damaged party should the closing agent fail to abide by the regulations outlined in the Iowa Code Title XIII, Chapter 535B. Specifically, the bond protects claimants if the closing agent commits fraud or engages in unfair business practices. In short, the bond is a type of insurance that protects the public if the closing agent violates the terms of their license.
How Can an Insurance Agent Obtain an Iowa Closing Agent Bond?
BondExchange makes obtaining an Iowa Closing Agent bond easy. Simply log in to your account and use our keyword search to find the “closing agent” 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.
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Is a Credit Check Required for the Iowa Closing Agent Bond?
Surety companies will run a credit check on the closing agent to determine eligibility and pricing for the Iowa Closing agent bond. Closing agents with excellent credit and work experience can expect to receive the best rates. Closing agents with poor credit may be declined by some surety companies or have to 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 Iowa Closing Agent Bond Cost?
The Iowa Closing Agent bond can cost between $100 to $1,500 per year or $10 to $150 a month. Monthly subscription options are also available. Insurance companies determine the rate based on several factors including your customer’s credit score and experience. The chart below briefly references the approximate bond cost on the $25,000 bond requirement.
$25,000 Iowa Closing Agent Bond Cost
| Credit Score* | Bond Cost (1 Year) | Bond Cost (1 month) |
|---|---|---|
| 720+ | $100 | $10 |
| 680 – 719 | $113 | $12 |
| 660 – 679 | $175 | $18 |
| 649 – 659 | $250 | $25 |
| 629 – 648 | $375 | $38 |
| 600 – 628 | $625 | $63 |
| 580 – 599 | $875 | $88 |
| 550 – 579 | $1,000 | $100 |
| 525 – 549 | $1,250 | $125 |
| 500 – 524 | $1,500 | $150 |
*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 Iowa Define “Closing Agent”?
To paraphrase Iowa Code 535B.1, a closing agent is a business that acts as a third party to a real estate transaction and provides various real estate closing services. For example, a closing agent may handle the disbursement of closing funds for a real estate transaction.
Exemptions to this definition include the following:
- Banks, bank holding companies, savings banks, saving and loan associations, and credit unions organized under Iowa law
- Insurance and loan companies
- Mortgage lenders and bankers
- Real estate brokers
- Non Profit organizations that qualify for tax-exempt status under the IRS that offer housing services to low and moderate-income families
- Licensed attorneys performing their regular duties
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 Closing Agents Become Licensed in Iowa?
Closing agents in Iowa must navigate several steps to obtain a license. Below are the general guidelines, but applicants should refer to the Department of Insurance and Financial Services Closing Agent Application Checklist for details on the process.
License Period – The Iowa Closing Agent license expires annually on December 31st.
Step 1 – Purchase a Surety Bond
Closing agents operating within the State of Iowa are required to purchase and maintain a surety bond.
Step 2 – Complete the Application
Applications for a closing agent license must be completed through the National Multistate Licensing System & Registry (NMLS). The application must include all addresses in which business is to be conducted, as well as the names and titles of each director and principal officer. A recently prepared certified financial statement and a $500 initial fee are also required.
How Do Iowa Closing Agents Renew Their License?
Closing agents can renew their licenses online through the NMLS website. License renewal applications are due by December 1st of each year and are subject to a $200 standard fee. A late fee of $10 per day is added to applications received after such due date.
What Are the Insurance Requirements for Closing Agents in Iowa?
Iowa does not require closing agents to purchase any form of liability insurance as a prerequisite to obtaining a license. Closing agents must purchase and maintain a $25,000 surety bond.
How Do Iowa Closing Agents File Their Bonds?
Closing agents should submit their completed bond forms, including the power of attorney, electronically through the NMLS. The surety bond requires signatures from the surety company, as well as a representative from the closing agent business. The surety company should include the following information on the bond form:
- Bond number
- The legal name of the individual buying the bond
- Surety company’s name
- Date the bond is signed
What Can Iowa Closing Agents Do to Avoid a Claim Against Their Surety Bond?
The best way to avoid a bond claim as an Iowa closing agent is to simply comply with state license laws. This includes providing real estate closing services such as preparing settlement statements, determining that all closing documents conform to the client’s contract requirements, receiving and disbursing funds, and completing documents per the client’s instructions for the transaction. For example, disbursing closing funds without a client’s permission is a breach of contract and is subject to a bond claim.
What Other Insurance Products Can Agents Offer Closing Agents in Iowa?
Iowa does not require closing agents to obtain any form of liability insurance. However, most reputable closing agents will purchase business liability insurance. Bonds are our only business at BondExchange, so we do not issue any other types of 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 Iowa Closing Agent Customers?
Iowa conveniently provides a public database via the NMLS to search for active closing agents 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.