Texas Residential Mortgage Loan Servicer Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain Texas Residential Mortgage Loan Servicer Bonds
At a Glance:
- Lowest Cost: 0.5% of the bond amount per year based on the applicant’s credit
- Bond Amount:
Table 1.1
| Loans Serviced | Bond Amount |
|---|---|
| Less than $25 million | $25,000 |
| $25 million or more | $50,000 |
- Who Needs it: All residential mortgage loan servicers operating in Texas
- Purpose: To ensure the public will receive compensation for any damages should the mortgage Servicer fail to comply with registration law
- Who Regulates Residential Mortgage Loan Servicers In Texas: The Texas Department of Savings and Mortgage Lending
Background
Texas statute 79.3 requires all residential mortgage loan servicers operating in the state to register with the Department of Savings and Mortgage Lending. The Texas legislature enacted the registration laws and regulations to ensure that mortgage servicers engage in ethical business practices. In order to provide financial security for the enforcement of the registration law, mortgage servicers must purchase and maintain a surety bond to be eligible for registration.
What is the Purpose of the Texas Residential Mortgage Loan Servicer Bond?
Texas requires residential mortgage loan servicers to purchase a surety bond as part of the application process to obtain a business registration. The bond ensures that the public will receive compensation for financial harm if the servicer fails to comply with the regulations set forth in Texas administrative code Chapter 79. Specifically, the bond protects the public in the event the servicer 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 servicer breaks registration laws.
How Can an Insurance Agent Obtain a Texas Residential Mortgage Loan Servicer Surety Bond?
BondExchange makes obtaining a Texas Residential Mortgage Servicer 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.
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 Texas Residential Mortgage Loan Servicer Bond?
Surety companies will run a credit check on the owners of the mortgage company to determine eligibility and pricing for the Texas Residential Mortgage Loan Servicer 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 Texas Residential Mortgage Loan Servicer Bond Cost?
The Texas Residential Mortgage Loan Servicer Bond can cost anywhere between 0.5% 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 both the $25,000 and $50,000 bond requirements.
$25,000 Residential Mortgage Loan Servicer Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 700+ | $125 | $13 |
| 650 – 699 | $250 | $25 |
| 625 – 649 | $313 | $32 |
| 600 – 624 | $470 | $47 |
| 550 – 599 | $1,000 | $100 |
| 500 – 549 | $1,250 | $125 |
$50,000 Residential Mortgage Loan Servicer Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 700+ | $250 | $25 |
| 650 – 699 | $500 | $50 |
| 625 – 649 | $625 | $63 |
| 600 – 624 | $940 | $94 |
| 550 – 599 | $2,000 | $200 |
| 500 – 549 | $2,500 | $250 |
How Does Texas Define “Residential Mortgage Loan Servicer”?
To paraphrase Texas statute 79.1, a residential mortgage loan servicer is any business entity who receives periodic mortgage payments from a borrower and then makes mortgage payments on the borrower’s behalf to the owner of the 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 Residential Mortgage Loan Servicers Apply for a Registration in Texas?
Residential mortgage loan servicers in Texas 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 Texas Residential Mortgage Loan Servicer registration expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Residential mortgage loan servicers must purchase and maintain a surety bond (limits outlined in Table 1.1)
Step 2 – Request a NMLS Account
The Texas Residential Mortgage Loan Servicer Registration application is submitted electronically through the Nationwide Multistate Licensing System (NMLS). To submit a registration application, applicants must first request to obtain an NMLS account.
Step 3 – Complete the Application
All Texas Residential Mortgage Loan Servicer Registration applications can be completed online through the NMLS. Applicants must complete the entire application, and pay a $700 application fee.
How Do Texas Residential Mortgage Loan Servicers Renew Their Registration?
Mortgage servicers can renew their registration online through the NMLS. Registration holders need to simply login to their account to access their renewal application. The Texas Residential Mortgage Loan Servicer registration expires on December 31 of each year and must be renewed before the expiration date.
What are the Insurance Requirements for the Texas Residential Mortgage Loan Servicer Registration?
Texas does not require mortgage servicers to purchase any form of liability insurance as a prerequisite to obtaining a business registration. Residential mortgage loan servicers must purchase and maintain a surety bond (limits outlined in Table 1.1).
How Do Texas Mortgage Servicers File Their Bond?
Mortgage servicers 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
- Bond amount
- Date the bond goes into effect
- Date the bond is signed
What Can Texas Residential Mortgage Loan Servicers Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, mortgage servicers in Texas must follow all registration 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
What Other Insurance Products Can Agents Offer Mortgage Servicers in Texas?
Texas does not require mortgage servicers to purchase any form of liability insurance as a prerequisite to obtaining a business registration. 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 Texas Mortgage Servicer Customers?
The NMLS conveniently provides a public database to search for active mortgage servicers in Texas. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.