The inside scoop on Mortgage Broker, Banker & Lender Bonds
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.