Mortgage Bond

A mortgage bond is an insurance policy that guarantees that the mortgage broker will fulfill their obligations to their clients. Mortgage surety bonds are required by law, although the type of bond a broker will need may vary from one state to the next. Mortgage bonds are essentially put in place to protect consumers who are in the process of obtaining mortgages for their homes, and mortgage brokers need them if they are to be licensed in their state. Most mortgage professionals will require a bond, but the actual requirements may vary from state to state.

Bonding is a three-way contract and involves the mortgage broker, the consumer who wishes to obtain a mortgage, and the surety who sold the bond to the broker. If a mortgage broker fails to fulfill its obligations to a client, the client can then file a claim against the bond. If the claim is proven to be valid, the surety reimburses the client financially according to the terms of the bond. It is then up to the mortgage broker to reimburse the surety for anything that was paid out to the client.

Even though it may seem like mortgage bonds only protect clients from any wrongdoing on the part of the mortgage broker, they also benefit mortgage brokers. Not only are mortgage bonds required of anybody who needs a license to work as a mortgage broker, but they also act as a guarantee that a broker will fulfill all of their obligations faithfully. In other words, mortgage bonds can act as a show of good faith for both brokers and clients. Even if you aren't technically required to purchase a mortgage bond, it is always in your best interest to do so, as not having one could mean paying out of your pocket for any claims made against you. This can also greatly damage your reputation and credit, which will make it more difficult to obtain a bond or a license.

To answer that question in the broadest possible terms, almost anyone who wishes to work within the real estate industry needs to obtain a mortgage bond. There are many different kinds of sureties out there though, and it will take some work to determine which ones are right for you. Here is a run-down of the kinds of professionals who need mortgage sureties to operate legally in their state.

• Mortgage brokers need mortgage surety bonds if they are to be licensed in their registered state. These bonds protect consumers and ensure that brokers can faithfully render their services to consumers.
• Mortgage lenders who loan money to someone to purchase mortgages require a bond to be licensed and to guarantee compliance with state laws surrounding the mortgage business.
• Mortgage originators work closely with borrowers to complete the mortgage transaction and are typically the main point of contact for borrowers who are trying to close mortgage transactions. Mortgage originators interview mortgage applicants, analyze preliminary loan requests, gather necessary background financial information on applicants and monitor the progress of a loan. Their important role in the mortgage application process requires them to secure mortgage sureties to operate according to the laws in their state.
• Mortgage servicers manage the day-to-day tasks of managing mortgage loans. Mortgage servicers are the ones who send mortgage statements to consumers, and they are usually the ones who collect any payments made on mortgages.

Every one of these professionals will need to purchase the mortgage bond, both to remain licensed to operate in their state, and to protect consumers from any fraud or other wrongdoing. The type of mortgage sureties that is required can vary depending on the state in which you operate. It will be largely up to you to determine what bonds you will need, but there is always assistance available if you need it.