Bond Requirements for Loan Originators and Brokers in Colorado
Mortgage Brokers
In Colorado, like other states, measures regulating the brokering industry have become more significant since the financial crisis of 2008. Most states now require mortgage brokers to get bonded, as a way to prevent fraud and protect homebuyers’ interests.
If the broker violates the terms of the bond agreement, they can face a bond claim and owe compensation. Typical violations include:
- Approving people for loans beyond their financial capabilities
- Charging hidden fees
- Pushing clients into unfavorable deals
- Encouraging clients to participate in fraudulent schemes
Mortgage Loan Originators
A similar surety bond requirement is set in place for mortgage loan originators, to ensure their compliance with relevant state and federal regulations. The minimum amount is $25,000 and the maximum is $200,000.
Mortgage loan originators need to get acquainted with the Secure and Fair Enforcement for Mortgage Licensing Act in order to stay out of claims. Some of the common violations are:
- Using “bait and switch” deceptive advertising methods
- Charging fees they are not authorized to
- Failing to disclose all information required by law
- Purposefully misleading borrowers or lenders
Questions about Mortgage Broker Bonds in Colorado
Colorado Mortgage Loan Originator and Broker Bond Cost
There is a quick way to estimate the cost of obtaining your surety bond. You need to know the required bond amount, i.e. the maximum compensation the bond can extend to claimants.
Bond applicants aren’t required to cover this whole amount, however. Instead, they pay yearly premiums, usually in the range of 1%-3% if they have good credit. The table below contains more information about expected premiums for these two types of bonds.
| Bond Type | Surety Bond Amount | Credit Sore | |||
|---|---|---|---|---|---|
| Above 700 | Between 650-699 | Between 600-649 | Below 599 | ||
| Colorado Mortgage Broker Bond | Colorado Mortgage Loan Originator Bond - Individual License | $25,000 | $188-$375 | $250-$750 | $625-$1,250 | $1,250-$2,500 |
| Colorado Mortgage Loan Originator Bond (Agency with less than 20 employees) | $100,000 | $750-$1,500 | $1,000-$3,000 | $2,500-$5,000 | $5,000-$10,000 |
| Colorado Mortgage Loan Originator Bond (Agency with more than 20 employees) | $200,000 | $1,500-$3,000 | $2,000-$6,000 | $5,000-$10,000 | $10,000-$20,000 |
Different surety bonds companies can take different factors into account when determining your premium. While personal credit score is undoubtedly very important, additional information such as financial statements, proof of liquid assets, or years in business may influence your costs as well.
You can learn more on our surety bond cost page.
Are these bonds available to applicants with bad credit?
Yes, both mortgage loan originators and mortgage brokers can get bonded despite having bad credit. An applicant's credit score is taken as a measurement of their likelihood of triggering claims. This is why bad credit applicants pay higher premiums.
However, if you can demonstrate that your businesses is financially strong, this will signal the surety that you are capable of making good on potential claims. As part of your application you can include personal and business financial statements (and those of all owners) as well as proof of all kinds of liquid assets such as cash on hand. Furthermore, if you clear past-due items from your credit report, this can drive your costs further down.
Our applicants are there for you, should you need any assistance in building a good bond application.
How can I apply for these bonds?
We have made our online application very simple and user-friendly. All it takes is five minutes to complete and submit it. We’ll contact you shortly after with your personal free quote.
If you choose to proceed with your application, we’ll guide you through the whole process and make sure all your questions are answered. As an industry standard, you will be asked to sign an indemnity agreement with the bonding company.
For any questions regarding your application, feel free to contact us at (877)-514-5146.
Understanding the Bond Claims Process
We already outlined a few typical violations, which may lead to claims against mortgage broker and mortgage loan originator bonds in Colorado.
The industry is under increased scrutiny, and it’s important to know and understand your obligations thoroughly in order to reduce the likelihood of facing a claim. Claims on these bonds can be quite costly. Furthermore, brokers or loan originators with past claims may find it impossible to get bonded next time they apply.
If you receive notification of a valid claim, you need to make good on it within the given deadline. If you fail to do so, the surety is obliged to provide the compensation you owe, but the ultimate responsibility always lies with you.
How to get a Colorado mortgage loan originator license?
To apply and get licensed as a mortgage loan originator, you will need to complete a number of steps. You must:
- Obtain an NMLS number
- Obtain errors and omissions insurance
- Submit fingerprints
- Take pre-licensing education
- Successfully pass the test
- Pay applicable fees
For the most complete and up-to-date information, make sure you contact the Department of Regulatory Agencies. The licensing requirements for mortgage brokers are very similar.
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