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 Tennessee mortgage broker bond needs. Learn how to become a mortgage broker in Tennessee, below.
What Mortgage Broker Licenses Are Issued in Tennessee?
The Tennessee Department of Financial Institutions (DFI) issues mortgage broker licenses for companies, branch offices, and individuals. The most common license is a mortgage license, which is issued to mortgage brokers, mortgage lenders, and mortgage servicers. In fact, it’s required for professionals in all three categories.
What Are the Steps in the Licensing Process?
Although it’s DFI that issues mortgage licenses, applications are submitted and processed through the Nationwide Mortgage Licensing System (NMLS). The NMLS website provides a checklist of eligibility criteria, application requirements, and instructions for the online application process.
Once you’ve gathered all the necessary information to be submitted with your application, you’ll need to establish an NMLS account and obtain an NMLS number. You’ll then sign into NMLS and complete the appropriate sections of the online application depending on whether you’re seeking a company, branch, or individual license.
You’ll also need to purchase and submit a Tennessee mortgage broker surety bond in the appropriate amount:
- For mortgage brokers – $90,000
- For mortgage lenders and servicers – $200,000
- For mortgage brokers also applying as lenders and/or servicers – $200,000
You’ll then upload all required documents, pay all application and processing fees, and submit your online application. You may be required to mail hard copies of certain documents to DFI.
Why is a Mortgage Broker Bond Required?
A Tennessee mortgage broker bond is a type of surety bond known as a license and permit bond. It’s a prerequisite for licensure and serves as a mortgage broker’s pledge to do business in compliance with all applicable statutes and regulations governing the Tennessee mortgage industry. Failure to do so can result in claims being filed against the bond by those who incur a financial loss as a result of the mortgage broker’s unlawful or unethical actions.
A Tennessee mortgage broker bond also indemnifies DFI (the “obligee” requiring the bond) and the surety company (referred to as the “surety”) against legal liability for any such claims. It makes the mortgage broker solely responsible for paying all valid claims.
How Are Mortgage Broker Bond Claims Paid?
A Tennessee mortgage bond functions as a line of credit that the surety establishes for a mortgage broker (the bond’s “principal”). This ensures that funds will be available for paying claims against the bond. While the principal is solely responsible for paying claims, the usual practice is for the surety to pay the claimant directly by drawing against that line of credit. That payment creates a debt that the principal must then repay to the surety.
How Much Does a Tennessee Mortgage Broker Bond Cost?
Tennessee mortgage broker bonds are sold for an annual premium that is calculated by multiplying the $90,000 or $200,000 bond amount by a premium rate that the surety establishes on a case-by-case basis. The surety’s main concern is being repaid for claims paid on behalf of the principal, so the principal’s creditworthiness is the key factor in determining the premium rate.
With a high personal credit score, the premium rate the principal will pay typically is in the range of 1% to 3%. So, a highly qualified principal may pay as little as $900 for a $90,000 mortgage broker bond.
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