Kentucky Mortgage Loan Originator Bond: A Comprehensive Guide

May 19, 2021

Kentucky Mortgage Loan Originator Bond

This guide provides information for insurance agents to help mortgage loan originators obtain Kentucky Mortgage Loan Originator 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 on the annual volume of loans originated

Table 1.1

Dollar Amount of Loans Originated Bond Amount
Less than $10 million $15,000
More than $10 million $20,000

  • Who Needs it: All registered mortgage loan originators (MLO) in Kentucky who are not covered under their employer’s surety bond
  • Purpose: To ensure the public will receive compensation for any damages should the mortgage loan originator fail to comply with the registration law
  • Who Regulates Mortgage Loan Originators in Kentucky: The Kentucky Department of Financial Institutions

Background

Kentucky statute 286.8-060 requires all mortgage loan originators operating in the state to register with the Department of Financial Institutions. The Kentucky legislature enacted the registration laws and regulations to ensure that mortgage loan originators engage in ethical business practices. In order to provide financial security for the enforcement of the registration law, mortgage loan originators, who are not covered under their employer’s surety bond, must purchase and maintain a surety bond to be eligible for registration.

What is the Purpose of the Kentucky Mortgage Loan Originator Bond?

Kentucky requires mortgage loan originators, who are not covered under their employer’s surety bond, to purchase a surety bond as part of the application process to register with the Department of Financial Institutions. The bond ensures that the public will receive compensation for financial harm if the mortgage loan originator fails to comply with the registration regulations set forth in Kentucky statute 286.8. Specifically, the bond protects the public in the event the mortgage loan originator engages in any acts of fraud or fails to honor all agreements made with consumers. In short, the bond is a type of insurance that protects the public if the mortgage loan originator breaks registration laws.

How Can an Insurance Agent Obtain a Kentucky Mortgage Loan Originator Surety Bond?

BondExchange makes obtaining a Kentucky Mortgage Loan Originator 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.

Do All Mortgage Loan Originators Need to Purchase a Bond?

No, in most instances the mortgage loan originator’s employer will cover the MLO under their own surety bond. MLOs are only required to purchase a bond if they are not covered under their employer’s surety bond.

Is a Credit Check Required for the Kentucky Mortgage Loan Originator Bond?

Surety companies will run a credit check on the MLO to determine eligibility and pricing for the Kentucky Mortgage Loan Originator bond. MLOs with excellent credit and work experience can expect to receive the best rates. MLOs 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 MLO’s credit.

How Much Does the Kentucky Mortgage Loan Originator Bond Cost?

The Kentucky Mortgage Loan Originator 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 the $15,000 bond requirement.

$15,000 Mortgage Loan Originator Bond Cost

Table 1.2

Credit Score Bond Cost (1 year)
700+ $113
650 – 699 $150
625 – 649 $188
600 – 624 $282
550 – 599 $600
450 – 549 $750

*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 Kentucky Define “Mortgage Loan Originator?”

Kentucky statute 286.8-010 defines a mortgage loan originator as any individual who negotiates the terms, conditions, or rate of a residential mortgage loan with a borrower or prospective borrower.

How do Mortgage Loan Originators Apply for Registration in Kentucky?

Money transmitters in Kentucky 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.

Registration Period – The Kentucky Mortgage Loan Originator Registration expires on December 31 of each year and must be renewed before the expiration date

*MLO registrations issued between November 1 and December 31 will expire on December 31 of the following year

Step 1 – Purchase a Surety Bond

Mortgage loan originators, who are not covered under their employer’s surety bond, must purchase and maintain a surety bond (limits outlined in Table 1.1)

Step 2 – Request a NMLS Account

The Kentucky Mortgage Loan Originator 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 2 – Complete the Pre-Registration Education

MLOs are required to complete 20 hours of approved pre-registration education prior to submitting their application

Step 3 – Pass the Exam

After completing their pre-registration education, MLOs must pass a registration exam administered through the NMLS

Step 4 – Complete the Application

All Kentucky Mortgage Loan Originator Registration applications can be completed online through the NMLS. Applicants must complete the entire application, and pay the following fees:

    • $50 registration fee
    • $36.25 background check fee
    • $30 NMLS processing fee
    • $15 credit report fee

How Do Kentucky Mortgage Loan Originators Renew Their Registration?

Mortgage Loan Originators can renew their registration online through the NMLS. Registration holders need to simply login to their account to access their renewal application. The Kentucky Mortgage Loan Originator Registration expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Kentucky Mortgage Loan Originator License?

The State of Kentucky does not require mortgage loan originators to obtain any form of liability insurance as a prerequisite to obtaining a business license. Mortgage loan originators, who are not covered under their employer’s surety bond, must purchase and maintain a surety bond (limits outlined in Table 1.1).

How Do Kentucky Mortgage Loan Originators File Their Bond?

Mortgage loan originators 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 loan originator. The surety company should include the following information on the bond form:

  • Legal name and address of entity/individual(s) buying the bond
  • Surety company’s name and address
  • Bond amount
  • Date the bond is signed

What Can Kentucky Mortgage Loan Originators Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, mortgage loan originators in Kentucky 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
  • Honor all agreements made with consumers
  • Pay all required taxes and fees

What Other Insurance Products Can Agents Offer Mortgage Loan Originators in Kentucky?

Kentucky does not require mortgage loan originators 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 Kentucky Mortgage Loan Originator Customers?

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

2021-12-28T15:20:33-05:00