New York Mortgage Loan Originator Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain New York Mortgage Loan Originator Bonds
At a Glance:
- Lowest Cost: 0.75% of the bond amount per year based on the applicant’s credit
- Bond Amount: Between $10,000 to $500,000 (more on this later)
- Who Needs it: All New York mortgage loan originators (MLOs) 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 violate licensing law
- Who Regulates Mortgage Loan Originators In New York: The New York Department of Financial Services
Background
New York statute 599-C requires all mortgage loan originators operating in the state to obtain a license with the Department of Financial Services. The New York legislature enacted the licensing 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 licensing law, mortgage loan originators who are not covered under their employer’s bond must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the New York Mortgage Loan Originator Bond?
New York requires mortgage loan originators who are not covered under their employer’s bond to purchase a surety bond as part of the application process to obtain a business license. The bond ensures that the public will receive compensation for financial harm if the mortgage loan originator fails to comply with the regulations set forth in New York Banking Code article 12-E. Specifically, the bond protects the public in the event the mortgage loan originator engages in any acts of fraud or breaches any contracts made with consumers. In short, the bond is a type of insurance that protects the public if the mortgage loan originator breaks licensing laws.
How Can an Insurance Agent Obtain a New York Mortgage Loan Originator Surety Bond?
BondExchange makes obtaining a New York 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? 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.
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How is the Bond Amount Determined?
The limit on the mortgage loan originator bond is based on the MLO’s aggregate dollar amount of mortgage loans originated, as detailed in the table below.
Table 1.1
| Loans Originated | Bond Amount |
|---|---|
| Less than $1 million | $10,000 |
| $1 million to less than $7.5 million | $15,000 |
| $7.5 million to less than $15 million | $25,000 |
| $15 million to less than $30 million | $50,000 |
| $30 million to less than $50 million | $75,000 |
| $50 million or greater | $100,000 |
Alternatively, if the MLO is covered under their employer’s surety bond, then the employer must purchase a bond with a limit based on the total number of MLO employees being sponsored. The limits for employee sponsored MLO bonds are detailed in the table below:
Table 1.2
| Loans Originated | Bond Amount |
|---|---|
| Less than 10 | $100,000 |
| 10 – 15 | $150,000 |
| 16 – 24 | $250,000 |
| 25 0r more | $500,000 |
Who is Required to Purchase a Bond?
To recap, MLOs who are not covered under their employer’s surety bond must purchase a bond with a limit based on the amounts listed in Table 1.1. If the MLO is covered under their employer’s bond, then the employer must purchase a bond based off of the limits in Table 1.2.
Is a Credit Check Required for the New York Mortgage Loan Originator Bond?
Surety companies will run a credit check on the MLO (or their employer) to determine eligibility and pricing for the New York 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 New York Mortgage Loan Originator Bond Cost?
The New York Mortgage Loan Originator 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 Loan Originator Bond Cost
Table 1.3
| 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 | $4,000 | $400 |
| 500 – 549 | $5,000 | $500 |
How Does New York Define “Mortgage Loan Originator?”
New York statute 599-B defines a mortgage loan originator as any individual who takes a residential mortgage loan application or who negotiates the terms of a residential mortgage 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 Loan Originators Apply For a License in New York?
Mortgage loan originators in New York 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 New York Mortgage Loan Originator License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Obtain Surety Bond Coverage
MLOs must either purchase an individual surety bond or be covered under their employer’s (limits outlined above)
Step 2 – Complete the Pre-Licensure Education
All MLO license applicants must complete 20 hours of pre-licensure education conducted by an approved course provider
Step 3 – Pass the Exam
After completing their pre-licensure education, MLOs must satisfy one of the following exam requirements:
-
- Passing results on both the National and New York State components of the SAFE Test
- Passing results on both the National and Stand-alone UST components of the SAFE Test
- Passing results on the National Test Component with Uniform State Content
Step 4 – Request a NMLS Account
The New York Mortgage Loan Originator 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 New York Mortgage Loan Originator License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Criminal background check
- Credit report
- Disclosure questions
- Proof of company sponsorship
- Detailed list of the MLO’s employment history
- Privacy act acknowledgement
- Proof of Identification
- Affirmation
- Information relating to any garnishment of wages or salary (if applicable)
Mortgage loan originators must pay the following fees when submitting their licence application:
-
- $379 application fee
- $36.25 background check fee
- $30 processing fee
- $15 credit report fee
How Do New York Mortgage Loan Originators Renew Their License?
Mortgage loan originators can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The New York Mortgage Loan Originator License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the New York Mortgage Loan Originator License?
New York does not require mortgage loan originators to purchase any form of liability insurance as a prerequisite to obtaining a business license. MLOs must either purchase an individual surety bond or be covered under their employer’s (limits outlined above).
How Do New York 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 company. The surety company should include the following information on the bond form:
- Name of entity/individual(s) buying the bond
- Surety company’s name and location
- Bond amount
- Date the bond goes into effect
- Date the bond is signed
What Can New York Mortgage Loan Originators Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, mortgage loan originators in New York must ensure that they 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 breach any contracts made with consumers
- Do not charge exorbitant fees
What Other Insurance Products Can Agents Offer Mortgage Loan Originators in New York?
New York does not require mortgage loan originators to purchase any form of liability insurance. However, most reputable MLOs will seek to purchase this insurance anyway. Bonds are our only business at BondExchange, so we do not issue 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 New York Mortgage Loan Originator Customers?
The NMLS conveniently provides a public database to search for active mortgage loan originators in New York. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.