Iowa Exempt Company Registration Bond: A Comprehensive Guide

April 29, 2021

Iowa Exempt Company Registration Bond

This guide provides information for insurance agents to help mortgage exempt companies obtain Iowa Exempt Company Registration Bonds

At a Glance:

  • Average Cost: Between $750 to $5,000 per year based on the applicant’s credit
  • Bond Amount: $100,000
  • Who Needs it: All companies exempt from mortgage licensing in Iowa who employ licensed mortgage loan originators and wish to manage their licensed employees through the NMLS
  • Purpose: To ensure the public will receive compensation for any damages should the mortgage company fail to comply with registration law
  • Who Regulates Mortgage Companies in Iowa: The Iowa Division of Banking

Background

Iowa statute 535.B allows all mortgage companies exempt from licensing requirements to register with the Iowa Division of Banking. The Iowa legislature enacted the registration laws and regulations to allow mortgage companies to manage their licensed mortgage loan originator employees through the Nationwide Multistate Licensing System (NMLS). In order to provide financial security for the enforcement of the registration law, exempt mortgage companies seeking registration must purchase and maintain a $100,000 surety bond to be eligible for registration.

What is the Purpose of the Iowa Exempt Company Registration Bond?

Iowa requires exempt mortgage companies to purchase a surety bond as part of the application process to register with the Division of Banking. The bond ensures that the public will receive compensation for financial harm if the mortgage company fails to comply with the registration regulations. In short, the bond is a type of insurance that protects the public if the mortgage company breaks registration laws.

Iowa Exempt Company Registration Bond Form

Iowa Exempt Company Registration Bond Form

How Can an Insurance Agent Obtain an Iowa Exempt Company Registration Surety Bond?

BondExchange makes obtaining an Iowa Exempt Company Registration Bond easy. Simply login to your account and use our keyword search to find the “exempt” 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 Iowa Exempt Company Registration Bond?

Surety companies will run a credit check on the owners of the mortgage company to determine eligibility and pricing for the Iowa Exempt Company Registration 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 Iowa Exempt Company Registration Bond Cost?

The Iowa Exempt Company Registration surety bond can cost anywhere between $750 to $5,000 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 Exempt Company Registration Bond Cost

Credit Score Bond Cost (1 year)
700+ $750
650 – 699 $1,000
625 – 649 $1,250
600 – 624 $1,500
550 – 599 $4,000
500 – 549 $5,000

*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 “Mortgage Company?”

Iowa statute 533C.102 defines a mortgage company as any business entity who performs in one or more of the following activities:

  • Makes at least four mortgage loans on residential real property located in Iowa in a calendar year
  • Originates at least four mortgage loans on residential real property located in Iowa in a calendar year and sells four or more such loans in the secondary market
  • Services at least four mortgage loans on residential real property located in Iowa
  • Arranges or negotiates, or attempts to arrange or negotiate, a minimum of 4 residential mortgage loans in a single calendar year

Who is Exempt From the Licensing Requirements?

Iowa mandates that businesses who perform any of the above services obtain either a mortgage broker or banker license. However, the following companies are exempt from the licensing requirements and instead have the option to register with the Iowa Division of Banking:

  • Banks, holding companies, and credit unions
  • Insurance companies
  • Real estate brokers
  • Nonprofit organizations
  • Licensed attorneys
  • Government officers acting in their official capacity
  • Qualified intermediaries or exchange accommodation title holders

Do Exempt Companies Need to Obtain a Registration?

No, exempt companies are not required to register with the Iowa Division of Banking. The reason some companies choose to obtain a registration is due to the fact that registered mortgage companies are able to manage their licensed mortgage loan originators through the NMLS. The Iowa Division of Banking recommends exempt mortgage companies consult with them prior to applying for registration.

How do Exempt Mortgage Companies Apply for Registration in Iowa?

Exempt mortgage companies in Iowa must navigate several steps to secure their registration. Below are the general guidelines, but applicants should refer to the NMLS’s application guidelines for details on the process.

Registration Period – The Iowa Exempt Company Registration expires on December 31 of each year and must be renewed before the expiration date

Step 1 – Purchase a Surety Bond

Exempt mortgage companies must purchase and maintain a $100,000 surety bond

Step 2 – Request a NMLS Account

The Iowa Exempt Company Registration 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 3 – Complete the Application

All Iowa Exempt Company Registration applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

    • The reason the applicant is exempt from the licensing requirements
    • Company formation documents

Exempt mortgage companies must pay the following fees when applying for their registration

    • $100 processing fee
    • $20 processing fee for each branch location

How Do Iowa Exempt Mortgage Companies Renew Their Registration?

Exempt mortgage companies can renew their registration online through the NMLS. Registration holders need to simply login to their account to access their renewal application. Companies must pay a $100 fee when renewing their registration. The Iowa Exempt Company Registration expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Iowa Exempt Mortgage Company Registration?

The State of Iowa does not require exempt mortgage companies to obtain any form of liability insurance as a prerequisite to obtaining a registration. Exempt mortgage companies applying for registration must purchase and maintain a $100,000 surety bond.

How Do Iowa Exempt Mortgage Companies File Their Bond?

Exempt mortgage companies 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
  • Date the bond is signed
  • Date the bond goes into effect

What Can Iowa Exempt Mortgage Companies Do to Avoid Claims Against Their Bond?

In order to avoid claims made against their bond, exempt mortgage companies in Iowa must follow all registration 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
  • Do not engage in any acts of fraud

What Other Insurance Products Can Agents Offer Mortgage Companies in Iowa?

Iowa does not require mortgage companies to obtain any form of liability insurance as a prerequisite to obtaining a registration. However, many 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 Iowa Exempt Mortgage Company Customers?

The NMLS conveniently provides a public database to search for active registered mortgage companies in Iowa. 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.

2021-04-29T19:43:42+00:00

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