The inside scoop on Mortgage Broker, Banker & Lender Bonds

Mortgage broker bonds, mortgage banker bonds and mortgage lender bonds are all obviously closely related to one another in that they all provide some sort of guarantee for the performance on a person or entity involved in a mortgage loan. Often times the same (or very similar) bond form may be used for each of these types. However, they differ in who and what exactly they guarantee. These commercial surety bonds are actually named after the principal of each bond. For example, the principal for a mortgage broker bond is the mortgage broker required to obtain the surety bond.

Mortgage brokers submit mortgage loan applications on behalf of their customers to individual banks and lenders, and then assemble loan costs and escrow funds to submit to banks and lenders they’ve opted to do business with.  Mortgage bankers and lenders offer mortgage loans and various other forms of secured as well as unsecured loans.

Subsequently, each of the 50 states require that these businesses (mortgage brokers, mortgage bankers and mortgage lenders) obtain necessary licenses to conduct business in that state, and also that they post either a mortgage broker bond, mortgage banker bond or a mortgage lender bond.  These surety bonds are required by the state, which for these bond types happens to be the obligee for the bond, of the respective principal (mortgage broker, banker or lender) in order to guarantee that the principal will follow all applicable state laws pertaining their specific industry, and also that the principal properly accounts for and remits funds received from customers.  These surety bonds also protect the public from any form of fraud or misrepresentation by the bond’s principal, while allowing the state to keep a hold-harmless agreement for any such misconduct.