How to Become a Mortgage Broker in Washington

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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 Washington mortgage broker bond needs. Learn how to become a mortgage broker in Washington, below.

What Mortgage Broker Licenses Are Issued in the state of Washington?

The state of Washington defines a mortgage broker as “any company (including a sole proprietorship) that for compensation or gain, or in the expectation of compensation or gain: (a) assists a person in obtaining or applying to obtain a residential mortgage loan or (b) holds itself out as being able to assist a person in obtaining or applying to obtain a residential mortgage loan.”

Although mortgage broker licenses are issued by the Washington Department of Financial Institutions (DFI), applications for licensure are submitted and processed through the Nationwide Mortgage Licensing System, or NMLS.

What Are the Steps in the Licensing Process?

The NMLS website provides a checklist you can use to make sure that you meet all eligibility criteria and pre-licensing requirements before you complete an application. Pre-licensing requirements include registering the business with the Washington Secretary of State, Washington Business License Services, and the Washington Department of Revenue. You’ll also need to apply for an NMLS account and obtain an NMLS ID number.

You’ll then need to complete the appropriate sections of the NMLS application, upload certain documents (with hard copies to be mailed directly to DFI), purchase and submit an electronic Washington mortgage broker bond in the amount of $20,000, and pay all required fees before your application will be considered complete.

Why is a Mortgage Broker Bond Required?

A Washington mortgage broker bond is a three-way, legally binding contract that:

  • Serves as the mortgage broker’s guarantee (the bond’s “principal”) that they’ll comply with the Washington Mortgage Broker Practices Act and the rules governing mortgage brokering in the state.
  • Indemnifies DFI (the “obligee” requiring the bond) and the surety company (referred to as the “surety”) against any financial responsibility if a consumer experiences a financial loss due to the principal’s noncompliance with the law and the terms of the surety bond agreement.
  • Obligates the principal to pay all valid claims against the bond.

How Are Mortgage Broker Bond Claims Paid?

Although the principal is legally responsible for paying all claims, in practice, the surety will pay a claim on behalf of the principal. This expedites the claimant’s receipt of compensation for damages. The surety’s payment of a claim creates a debt that the principal owes to the surety and is legally obligated to repay. Repayment to the surety typically can be done in installments over a certain period of time, which is much easier than having to pay a potentially large sum all at once.

How Much Does a Washington Mortgage Broker Bond Cost?

The surety establishes the premium rate (a percentage of the $20,000 bond amount, or “penal sum”) for a given principal. This is based on the amount of risk involved in extending credit to the principal by paying claims on the principal’s behalf. The main factor considered by the underwriters is the principal’s personal credit score.

The higher the principal’s credit score, the lower the premium rate the principal will pay. With excellent credit, the premium rate could be as low as 1% of the bond’s penal sum.

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