What Is an Alabama Mortgage Broker Bond?
An Alabama mortgage broker bond is a requirement for mortgage brokers who want to get licensed in the state. Mortgage broker bonds are a typical licensing requirement for brokers across the U.S.
The bond is required by the Alabama State Banking Department to ensure that brokers will follow the rules set in relevant state legislation, such as the Alabama Mortgage Broker Licensing Act, Alabama Consumer Credit Act, and Alabama Secure and Fair Enforcement for Mortgage Licensing Act.
Just like other surety bonds, the Alabama mortgage broker bond is a contractual agreement between three entities. The principal is your brokerage, the State Banking Department that asks you to get bonded is the obligee, and the surety is the one that backs your business with a bond.
Questions about Mortgage Broker Bonds 2
Who needs to obtain a Alabama mortgage broker bond?
If you want to engage in brokering in Alabama, you need to obtain an Alabama mortgage broker license. The bond is one of the main requirements to getting licensed. Entities that might have to get bonded include banks, real estate agents and entities licensed under the Alabama Consumer Credit Act. Mortgage loan originators need to get bonded individually, or via the company they are working for.
The bond is there to protect the state and your customers from any fraud and misuse your brokerage might engage in. This includes intentional fraud to customers, unlawful collection of fees, and hiding financial transactions, among others.
How much does a Alabama mortgage broker bond cost?
Your surety bond price is determined by the bonding amount you need to post during the licensing process. This is set by the licensing authority on a case-by-case basis.
You’ll be asked to pay a bond premium, which is a fraction of the bond amount you must obtain. In many cases, this amounts to 1%-5% of the bond. This means that if you need to post a $30,000 bond, you might have to pay between $300 and $1,500.
Your Alabama mortgage broker bond cost is determined on the basis of your personal and business financials. The surety has to examine your personal credit score, business finances, liquidity and assets, and professional experience. If your finances are stable, you will be assessed as a low-risk applicant, thus your premium will be smaller.
Our surety bond cost page can give you a more detailed overview of how your bond price is set.
Can I get bonded with bad credit?
For Alabama mortgage brokers with problematic finances, Lance Surety Bonds offers its Bad Credit Surety Bonds program. It’s here to help applicants with low credit scores, tax liens, bankruptcies, or civil judgements obtain the bond they need.
The usual bad credit bonding premiums are between 5%-10%. You need to cover a higher price because of the increased bonding risk. However, we work with a number of A-rated, T-listed surety companies, so we can choose the best bonding option for your case.
How do I apply for a Alabama mortgage broker bond?
Start your bonding process today by applying online for a free bond quote. Once you submit your complete application, we will deliver your exact price in no time.
For further information, you can consult our How to Get Bonded page for an in-depth explanation of the bonding process.
Need assistance? Just call us at (877) 514-5146, and Lance Surety Bonds’ experts will gladly help.
What happens in case of a claim against me?
The Alabama mortgage broker bond is not a safety net for your brokerage. Instead, it is protection for the state and for your customers.
If you happen to breach the rules set in the relevant state acts, or you engage in fraud such as hiding finances, not making disclosures, or charging unneeded fees, you can get a claim on your bond.
The bond guarantees that on proven claims, affected parties can get reimbursement that is up to the penal sum of the bond. Initially, it’s your surety that covers the costs. Soon after, you need to repay it in full. That’s why avoiding situations that can lead to claims is the wisest course of action for your brokerage.