California Finance Lender Bonds Explained
Finance brokers and lenders alike are required to get bonded before they can legally operate in the state of California. The California Department of Business Oversight mandates the bond to protect the interests of the state, and anyone working with financial lenders and brokers.
If a lender/broker does not comply with the applicable provisions of the California Finance Lenders Law– or additional regulations introduced by the Commissioner of Business Oversight– they can face a claim against their bond. The purpose of bond claims is to provide a quick recourse for third parties that may have been adversely affected by the actions of the bonded business.
The sections below contain more useful information about these bonds. You can also check out our page on surety bonds in California to learn more about the different bonding requirements in the state.
Still have questions? Don’t hesitate to call us at (877)-514-5146 and we’d be happy to help!
Questions about Mortgage Lender Bonds
How much does a California lender bond cost?
The penal sum of the bond required from brokers and lenders is $25,000. In other words, a claimant can receive up to $25,000 in compensation if they have been wronged by the unlawful actions of a broker/lender. However, your bond amount can go up if you employ one or more mortgage loan originators, or if your business makes or arranges residential mortgage loans. Each mortgage loan originator in your company must hold a separate surety bond.
The price brokers/lenders pay to get bonded is a fraction of the total, called a bond premium. Bond premiums are paid on a yearly basis and can be as little as 1% for applicants with good credit. Those with bad credit typically pay a higher premium due to the higher risk involved for the bond underwriter.
The table below contains a more detailed breakdown of estimated premiums based on the applicant’s credit score.
|Bond Type||Surety Bond Amount||Credit Sore|
|Above 700||Between 650-699||Between 600-649||Below 599|
|California Finance Lender Bond||(Minimum Amount) $25,000||$188-$375||$250-$750||$625-$1,250||$1,250-$2,500|
Keep in mind that surety companies may require that you submit additional information which will further influence your premium. Examples include personal or business financial statements or even a résumé outlining your industry experience.
Check out our “What Does a Surety Bond Cost?” page for more information on bonding rates.
Can I get this bond if my credit score is low?
Applicants with a FICO score of 650 or less can get bonded, thanks to our program for bad credit surety bonds. We’ve established a network of trusted surety companies, which means we can negotiate the best rate on your behalf despite your credit score.
It’s inevitable that bad credit applicants will pay a slightly higher premium. However, our team of agents will work closely with you to help you prepare a strong application and maximize your chances of getting the lowest possible rate.
There are some exceptions when it comes to getting bonded with bad credit, though. Usually, applicants with open bankruptcies and/or late child support payments will be denied bonding.
How do I apply for this bond?
To get your California finance lender/broker bond, just fill out and submit our online application. As soon as we receive your application, one of our agents will get in touch with you and give you a free no-obligations bond quote based on the information you provided in the application.
As an industry standard, you will have to sign an indemnity agreement with the surety, and submit some additional paperwork they might suggest.
When we process your paperwork and payment, your bond should be ready within 24 to 48 hours.
For any questions regarding your application, do not hesitate to call us at (877)-514-5146.
Are there other important licensing requirements for lenders and brokers in California?
In addition the the surety bond, there are some other important requirements you need to comply with in order to keep your licensure active.
Before March 15th of each year, you are required to file an annual report, even if you haven’t conducted business with your license.
Before September 30th of each year, the Department of Business Oversight will notify you of the dollar amount that is levied against your business (the minimum amount is $250). You have until October 31st to pay that amount or you can lose your license.
Minimum Net Worth Requirements
You must keep a minimum net worth of $25,000 if you operate alone and a minimum of $250,000 if you employ mortgage loan originations.
Finally, the Department of Business Oversight can subject you to an examination at any time and you are responsible for covering the cost of the exam.