How to obtain a mortgage broker license and a mortgage broker bond in Ohio
The last two decades saw a gradual tightening of regulations in the housing sector. That was especially true after the burst of the real estate bubble in 2008, but things were underway even before that. In 2002, the State of Ohio passed the Ohio Mortgage Broker Act to replace previous legislation that was not as restrictive. Read on to find out more about the steps you need to take to obtain your mortgage broker license.
Definition of Ohio Mortgage Broker
The State of Ohio has more than one mortgage broker license. They are all handled by the National Mortgage Licensing System, so the best way to determine the category in which you fall is to visit their website. Some of the requirements include:
- Three or more years of experience in the field of mortgage lending
20 hours of training (or more) at a certified training institution
8 hours of continuing education per year
Successfully passed examination
$600 licensing fee
Photos of state-approved business location
Copy of fingerprints
Criminal background check, examination of character, financial condition and previous experience
At the time of submission, you need to pay a $150 non-refundable application fee for each of your business locations. A very important requirement is posting an Ohio mortgage broker bond.
Mortgage broker bonds
Mortgage broker bonds fall into the category of commercial (or license) surety bonds. They are a financial guarantee that makes sure mortgage brokers will operate according to state regulations. They also serve to protect their customers from any unfair practices. Since mortgage brokers are the middle men between the lender and the borrower, that’s an important requirement. If a customer triggers a claim, the mortgage broker bond will kick in and ensure he gets financial compensation.
The State of Ohio requires all mortgage brokers to post a mortgage broker bond to the amount of $50,000. Up until recently the price was $25,000 (half the revised amount) which is evidence of the tightened regulations. Mortgage broker bonds are underwritten by sureties. Their signature basically says that you are reliable enough to operate as a mortgage broker.
How to obtain a mortgage broker bond
You can easily obtain a mortgage broker bond through the website of a surety bonds agency. After submitting certain personal details about you and your business, you will be given an annual premium. It is a certain percentage of the total $50,000 amount. The most important determinant of your premium is your personal credit score. If your credit standing is good, you can expect annual premiums between 1% and 5%.
High-risk applicants are subject to slightly higher annual premiums. You are considered a high-risk applicant if you have bad credit score (650 or below), have civil judgments, tax liens or bankruptcies in your credit history. A bad credit score will generally not cause your application to be declined. In fact, 99% of mortgage brokers can get bonded. Your premiums will be between 5% and 15% and some rare cases might require posting a small collateral as well. The 1% of applications that get declined are people with open bankruptcies and late child support payments.
No matter how much you pay for your bond, all Ohio mortgage broker bonds expire on April 30th each year, so you will have to renew yours before then. And if your credit score improves and you stay out of claims, each year you will pay a smaller premium.