Alabama Mortgage Broker Bonds
Surety Bond Professionals is a family-owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your Alabama mortgage broker bond needs.
What Are They?
Alabama mortgage broker bonds are categorized as a type of license and permit surety bond. This is because purchasing one is a prerequisite for becoming and remaining licensed as a mortgage broker in Alabama. The bond serves as a mortgage broker’s guarantee to abide by all applicable state laws and regulations. It provides a way to compensate any party financially harmed by a mortgage broker’s unlawful or unethical business practices and indemnifies the state against liability for having issued a license to the broker.
Who Needs Them?
Alabama’s Banking Department issues licenses for residential mortgage brokers. Obtaining an Alabama mortgage broker bond is a mandatory step in the licensing process. The bond must be renewed at every license renewal. Not having a valid mortgage broker bond in place at all times is grounds for license revocation.
The required bond amount is based on the previous year’s loan volume. It ranges from a minimum of $25,000 for a loan volume below $25 million to $75,000 for a loan volume in excess of $100 million.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
The surety bond agreement for an Alabama mortgage broker brings together three parties in a legally binding contract. In the lingo of surety bonds, these parties are:
- The “obligee” requiring the bond—the Alabama State Banking Department
- The “principal” required to purchase the bond—the mortgage broker
- The “surety” underwriting and approving the bond—the surety bond company
A principal who violates any of the terms of the surety bond agreement risks having a claim filed against the bond—a claim that the principal is legally obligated to pay. In most cases, however, the surety will pay a valid claim directly, essentially extending credit to the principal and creating a debt that the principal must repay to the surety.
There are good reasons for this practice. First, it ensures that the claimant is compensated in a timely manner. It also allows the principal to repay the debt to the surety in manageable installments, which is a lot easier than coming up with a large lump sum all at once.
What Do They Cost?
Alabama mortgage broker bonds are subject to underwriting. The premium is a small percentage of the required bond amount, and the premium rate for a given bond is based in large part on the principal’s personal credit score. That’s the best indicator of the likelihood that the principal will repay the surety without the need for the surety to take legal action.
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Our surety bond professionals will get you the Alabama mortgage broker bond you need at a competitive rate.