NY Introduces Permanent Licensing Requirements for Mortgage Servicers
In July 2019, the state of New York adopted regulations for the licensing and financial responsibility of mortgage loan servicers. The requirements for applicants include posting a NY mortgage servicers bond and a fidelity bond, among others.
Previously, the NY Department of Financial Services has used the same licensing criteria as emergency regulations at times when it has deemed that the industry requires them, such as in 2015 and 2017. However, now the licensing is being established as a permanent requirement. Thus, moving forward, all mortgage servicers will have to go through it.
In the sections below, you can find out more details about the licensing procedure and the New York mortgage loan servicer bond.
The permanent licensing requirements
The newly established criteria for mortgage loan servicers in the state are announced in the New York State Register of July 2019. They are being enforced by the Department of Financial Services.
As noted, the requirements for licensing and providing financial responsibility proof are not new. They have been used as emergency measures in the last few years. With the new regulations, however, the licensing requirements are set as permanent. All applicants for a mortgage loan servicer license in NY have to submit their documents via the Nationwide Multistate Licensing System & Registry (NMLS).
Together with a complete application, you have to provide a $250,000 surety bond. It works as a protection mechanism that safeguards the interests of your customers in the state by guaranteeing your legal compliance. In case you transgress from your obligations under the law, harmed parties can seek compensation via a bond claim.
Additionally, in order to get licensed, you have to obtain a fidelity bond and errors and omissions (E&O) coverage for losses caused by fraud, embezzlement, misplacement, and forgery. The amount of the coverage is based on your volume of NY loans as presented in your Volume of Servicing Report, as follows:
- Less than $100 million – $300,000
- For the next $500 million – plus .15%
- For the next $400 million – plus .125%
- More than $1 billion – plus .1%
The deductible amount on fidelity bond and E&O policy cannot be more than $100,000 or 5% of the face amount of the bond.
Applicants also have to pay the relevant licensing fees, which include $3,000 investigation fee, $102.25 for fingerprint processing, and $100 NMLS processing fee.
Obtaining the necessary NY mortgage servicers bond
In order to get bonded, you have to pay a fraction of the required surety bond amount, which is $250,000 in this case. The percentage is formulated on the basis of your personal and business finances, such as credit score and company paperwork. The stronger these factors are, the lower your bond cost would be.
The typical rates for applicants with stable finances are between 0.5% and 5%. Thus, your bond price can be between $1,250 and $12,500 if you can showcase that your finances are in good shape.
Do you have further questions about the NY mortgage servicers bond requirement? You can speak with our bonding experts by calling us at 877.514.5146.