What Is a California Mortgage Broker Bond?
Mortgage brokers in California can get licensed via two different processes, depending on their business goals. The California mortgage broker bond is one of the main licensing requirements for one of the licensing options.
Regulating authorities require mortgage broker bonds in most states. The goal of these bonds is to protect your customers from potentially unlawful activities you may engage in. If a party suffers damages as a result of such actions, they can seek a reimbursement via a claim against your bond.
Your California surety bond is, in essence, a contractual agreement between three parties. The principal is your mortgage brokerage that needs to post the bond. The California Department of Business Oversight is the obligee to which you have to present the bond. Last but not least, the surety is the third entity that provides the bonding.
Questions about Mortgage Broker Bonds in California
Who needs to obtain a mortgage broker bond?
Mortgage brokers in California have two licensing options. You can license with the California Department of Business Oversight (DBO). In this case, your activities are regulated by California Finance Lenders Law (CFL) and you can partner only with lenders licensed under the CFL. As a part of getting this California mortgage broker license, you need to post a $25,000 broker bond.
Alternatively, you can also obtain a license with the California Bureau of Real Estate. Then you can work with all types of lenders. The licensing does not entail posting a bond.
How much does the bond cost?
California mortgage brokers who want to obtain a DBO license have to post a $25,000 bond. This is referred to as the bond amount, which is different from your bond premium. Your bond price is, in fact, only a few percents of this amount. If your finances are in good shape, the premium is likely to be between 1% and 5%.
|Surety bond name||Surety bond amount||Above 700||Between 650-699||Between 600-649||Below 599|
|California mortgage broker bond||$25,000||$125-$312.5||$187.5-$375||$500-$$1,250||$1,250-$2,500|
Your surety bond cost is determined on the basis of your personal credit score, business finances, and any assets and liquidity that you can showcase. After you apply with a surety, it will examine all these factors. In this way, it will assess the level of risk that bonding you poses. You can expect a lower bond cost if your finances and business stats are stable.
Can I get a bond with bad credit?
Lance Surety Bonds can get you bonded even if you are struggling with problematic finances. Our Bad Credit Surety Bonds program is suitable for mortgage brokers with low credit scores, tax liens, bankruptcies, or civil judgements.
The bond rates for bad credit applicants are typically between 5% to 10%. The higher price is due to the increased bonding risk. Still, w work with a number of A-rated, T-listed surety companies. This means we can shop around for the best bonding option for you.
How do I apply for my bond?
Are you interested in learning more about how bonding works? You can consult our How to Get Bonded page for thorough details.
You can always reach us at (877) 514-5146 for further questions. Lance Surety Bonds’ experts will assist you with your application or queries.
How are bond claims handled for mortgage brokers?
Surety bonds are there to guarantee your compliance with the law. In the case of California mortgage broker bonds, they ensure you will follow your obligations under the California Finance Lenders Law. If you fail to abide by it, you can get a claim on your bond. An affected party can seek a reimbursement of up to $25,000, the penal sum of your bond.
At first, it may be your surety that takes over the costs for proven claims, so that the claimant gets a quick compensation. However, you have to repay it fully afterwards. This means that bond claims are to be avoided as much as possible.