Tennessee Mortgage License Bond: A Comprehensive Guide

August 26, 2021

Tennessee Mortgage License Bond

This guide provides information for insurance agents to help their customers obtain Tennessee Industrial Loan and Thrifter 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: 
    • $90,000 for mortgage broker
    • $200,000 for mortgage lenders
    • $200,000 for mortgage servicers
  • Who Needs it: All mortgage brokers, lenders, and servicers operating in Tennessee
  • Purpose: To ensure the public will receive compensation for any damages should the mortgage company violate licensing law
  • Who Regulates Mortgage Companies In Tennessee: The Tennessee Department of Financial Institutions

Background

Tennessee statute 45-13-201 requires all mortgage brokers, lenders, and servicers operating in the state to obtain a license with the Department of Financial Institutions. The Tennessee legislature enacted the licensing laws and regulations to ensure that mortgage companies engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, mortgage companies must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the Tennessee Mortgage License Bond?

Tennessee requires mortgage companies 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 company fails to comply with the regulations set forth in the Tennessee Residential Lending, Brokerage, and Servicing Act. Specifically, the bond protects the public in the event the mortgage company 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 company breaks licensing laws.

Tennessee Mortgage License Bond Form

Tennessee Mortgage License Bond Form

How Can an Insurance Agent Obtain a Tennessee Mortgage Industry Surety Bond?

BondExchange makes obtaining a Tennessee Mortgage Industry 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 Tennessee Mortgage License Bond?

Surety companies will run a credit check on the owners of the mortgage company to determine eligibility and pricing for the Tennessee Mortgage License bond. Owners 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 Tennessee Mortgage License Bond Cost?

The Tennessee Mortgage License Bond can cost anywhere between 0.75% to 5% 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 both the $90,000 and $200,000 bond requirements.

$90,000 Mortgage Company Bond Cost

Credit Score Bond Cost (1 year)
700+ $675
650 – 699 $900
625 – 649 $1,125
600 – 624 $1,692
550 – 599 $3,600
500 – 549 $4,500

$200,000 Mortgage Company Bond Cost

Credit Score Bond Cost (1 year)
700+ $1,500
650 – 699 $2,000
625 – 649 $2,500
600 – 624 $3,760
550 – 599 $8,000
500 – 549 $10,000

How Does Tennessee Define “Mortgage Company?”

Tennessee statute 45-13-15 defines a mortgage company as any business entity who proves one or more of the following services:

  • Solicits, places, negotiates, or originates residential mortgage loans or who closes a residential mortgage loan in their own name with funds provided by another person (broker)
  • Makes a residential mortgage loan (lender)
  • Services and accepts payments on a residential mortgage loan (servicer)

How do Mortgage Companies Apply For a License in Tennessee?

Mortgage companies in Tennessee 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 Tennessee Mortgage License 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 Tennessee Mortgage License must have a company net worth (assets – liabilities) of at least $25,000 per office location. Applicants must submit a compiled financial statement, prepared by a CPA, verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Mortgage companies must purchase and maintain a surety bond with the following limit:

    • $90,000 for mortgage broker
    • $200,000 for mortgage lenders
    • $200,000 for mortgage servicers

Step 3 – Hire a Qualifying Individual

All mortgage companies must employ a qualifying individual who is responsible for the actions committed by the company. The qualifying individual should have a minimum of three years of industry experience. Mortgage companies must submit a detailed resume for the qualifying individual with their license application.

Step 4 – Request a NMLS Account

The Tennessee 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 5 – Complete the Application

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

    • Company financial statements indicating a net worth of at least $25,000 per office location
    • Primary company and consumer complaint contacts
    • Disclosure questions
    • Company’s independently reviewed AML/BSA policy
    • Company business plan containing the following information:
      • Marketing strategies
      • Products
      • Target markets
      • Fee schedule
      • Operating structure
    • Certificate of Good Standing
    • Company formation documents
    • Management chart detailing the company’s hierarchy
    • Organization chart detailing the company’s ownership structure
    • Detailed resumes for all control persons

Mortgage companies must pay the following fees when submitting their license application:

    • $1,000 license fee
    • $100 NMLS processing fee
    • $36.25 background check fee (per person)
    • $15 credit report fee (per person)

How Do Tennessee Mortgage Companies Renew Their License?

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

What Are the Insurance Requirements for the Tennessee Mortgage License?

Tennessee does not require mortgage companies to purchase any form of liability insurance as a prerequisite to obtaining a business license. Mortgage companies must purchase and maintain a surety bond with the following limit:

  • $90,000 for mortgage broker
  • $200,000 for mortgage lenders
  • $200,000 for mortgage servicers

How Do Tennessee Mortgage Companies File Their Bond?

Tennessee 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:

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

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

To avoid claims on their bond, mortgage companies in Tennessee must follow all license regulations in the state, including some of the most important issues below that tend to cause claim

  • Do not engage in any acts of fraud
  • Do not breach any contracts made with consumers

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

Tennessee does not require mortgage companies to purchase any form of liability insurance as a prerequisite to obtaining a business 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 lenders for this specific line of business. A list of lenders in this space can be found here.

How Can Insurance Agents Prospect for Tennessee Mortgage Company Customers?

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

2021-12-29T09:44:29-05:00