How to Become a Mortgage Broker in California

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Surety Bond Professionals is a family-owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your California mortgage broker bond needs. Learn how to become a mortgage broker in California, below.

What Mortgage Broker Licenses Are Issued in California?

California issues three different types of mortgage broker licenses, all of which involve different licensing requirements and application processes:

  • The California finance lender (CFL) license, issued by the California Department of Business Oversight (DBO), allows licensees to make or broker consumer and commercial real estate loans. However, loans may only be brokered with other lenders holding a CFL license.
  • The residential mortgage lender (RML) license is also issued by DBO. Licensees can make and service mortgage loans but may only broker loans if they’re also licensed as a mortgage loan originator.
  • The real estate broker license is issued by the Bureau of Real Estate (BRE). It allows licensees to act in a dual capacity as both real estate brokers and mortgage brokers.

This article focus on the CFL license for residential mortgage brokers, which is processed through the Nationwide Mortgage Licensing System, or NMLS.  Applications for commercial CFL licenses are submitted directly to DBO rather than through NMLS.

What Are the Steps in the Licensing Process?

Once you’ve ascertained that you meet all of the licensing requirements (e.g., net worth, pre-licensing education, etc.), the licensing process involves:

  • Applying for an NMLS account and ID number.
  • Submitting a CFL license application (as an individual or for a company).
  • Submitting a $25,000 surety bond.
  • Submitting required criminal background check(s).
  • Paying the required licensing and processing fee (currently $400).

Why is a Mortgage Broker Bond Required?

A California mortgage broker bond serves as your guarantee to abide by all applicable California statutes and regulations in operating as a mortgage broker. It also protects the state of California against liability for any consumer losses caused by your unlawful or unethical actions in brokering residential mortgages. Additionally, it ensures that funds will be available for compensating the injured party in such cases.

How Are Mortgage Broker Bond Claims Paid?

The surety bond agreement for a California mortgage broker bond is a three-way, legally binding contract between the “obligee” requiring the bond (DBO), the “principal” purchasing the bond (the mortgage broker), and the “surety” underwriting and issuing the bond (the surety company).

The terms of the agreement make the principal solely responsible for paying valid claims against the bond. However, normal practice is for the surety to pay the claimant directly, on behalf of the principal. This ensures prompt resolution of the claim and gives the principal some time to gather the funds to repay the resulting debt to the surety.

How Much Does a California Mortgage Broker Bond Cost?

The surety’s main concern in setting the premium rate for a California mortgage bond is the risk of extending credit to the principal. Consequently, the primary factor considered is the principal’s personal credit score, with a highly creditworthy principal paying the lowest premium rate—generally in the range of 1% to 3%.

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