Colorado 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 your Colorado mortgage broker bond needs.
What Are They?
Colorado mortgage brokers are considered mortgage loan originators. They are required to obtain a Colorado mortgage loan originator surety bond (also known as a Colorado mortgage broker bond) as part of the licensing process. Colorado mortgage broker bonds have two main purposes:
- They serve as a mortgage loan originator’s guarantee to comply with all applicable laws and regulations governing the mortgage industry in Colorado.
- They protect the state and consumers against financial loss resulting from a mortgage loan originator’s violation of any of those laws and regulations by providing a source of funds for paying damages to the injured parties.
Who Needs Them?
Anyone applying for or renewing licensing as a mortgage loan originator by the Colorado Department of Regulatory Agencies must purchase a Colorado mortgage bond. There must be a Colorado mortgage bond in force at all times to prevent license suspension or revocation.
Speak with a Surety Bond Professionals agent today to discuss your bonding needs.
How Do They Work?
Like other surety bonds agreements, the agreement for a Colorado mortgage broker bond is a legally binding contract between three parties: the obligee, the principal, and the surety. In the case of a Colorado mortgage broker bond, these parties are:
- The Colorado Department of Regulatory Agencies, the “obligee” requiring the bond.
- The mortgage broker or loan originator, the “principal” purchasing the bond.
- The bonding company, the “surety,” underwriting and issuing the bond.
Any party incurring a financial loss because of the principal’s unlawful or unethical business conduct has the right to file a claim against a Colorado mortgage broker bond. The surety investigates each claim as it is received and determines whether or not it is valid. If it is, the surety may attempt to negotiate an amicable settlement.
Absent a settlement, the principal is legally obligated to pay any valid claim. However, the usual practice is for the surety to pay the claim on behalf of the principal, drawing down a line of credit established for the principal when the bond was issued. That extension of credit creates a debt that the principal must repay to the surety.
What Do They Cost?
The annual premium for a Colorado mortgage broker bond is a small percentage of the required bond amount (the bond’s “penal sum”) established by the obligee. The penal sum for a given principal depends on whether the bond is for a company or an individual. Individual mortgage loan originators must purchase a bond in the amount of $25,000. A principal with 19 or fewer employees must purchase a $100,000 bond, and one with 20 or more employees must purchase a $200,000 bond.
The surety’s main concern is the amount of risk involved in extending credit to the principal for the purpose of paying claims. The surety relies mainly on the principal’s personal credit score as an indicator of creditworthiness, although for mortgage companies requiring larger bonds, will likely consider the financials in their underwriting. A principal with excellent credit may pay a premium as low as 1% of the bond’s penal sum. A principal with lesser credit will pay a higher premium rate.
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Our surety bond professionals will get you the Colorado mortgage broker bond you need at a competitive rate.