If you’ve ever purchased a home or rental property, chances are you’ve had a mortgage. The process of applying for a mortgage can be time consuming and arduous, often making the applicant feel fully exposed. All financial information including income, debt, and savings are divulged to someone who has just become a quick acquaintance. This person has instant access to your entire financial worth. How do you know they will maintain confidentiality? Will you accept them at their word and risk being burned by a complete stranger? Well, the first thing to ask before continuing the relationship past hello, is whether or not they hold a Mortgage Broker Bond.
A Mortgage Broker Bond is issued to a broker who possesses good credit and signifies to the public that he will not take part in any misrepresentation, fraud or wrongfully withhold monetary deposits. This bond guarantees that the broker complies with state and local laws and that the broker will be subject to paying a fine for violating laws granted to them. The brokers must possess the financial resources to meet any obligation carried with the bond, since the purpose of a Mortgage Broker Bond is to recover any expenses, fines or levies incurred as a result of non-compliance. Additionally, any losses to customers of the broker or any borrowers, which are directly resulted to the unlawful practice of the broker, are covered by the bond as well. By covered, it is meant here that the broker personally has the funds to cover losses. This bond does not serve the function of an insurance document in that it itself will cover any losses, rather it assures that the broker named can afford to pay out of pocket.
In order to obtain a bond, a broker must contact their state department for a list of insurance companies that work in Mortgage Broker Bonds, unless the broker’s own insurance company can provide the required information. Additionally, there are a multitude of companies readily able to provide quotes to the online consumer.
A mortgage broker works on behalf of consumers to process, solicit, and place a request for a mortgage on behalf of their clients. Most states require that whether the broker carries out these tasks by phone, email, fax or in person, they must carry this type of bond. As a consumer, be aware that these bonds are only mandatory in 45 states so if you reside in a state where they aren’t mandatory, ensure you have thoroughly researched your broker before business commences. This can mean taking extra care to review the broker before work commences as well as be careful to read all information, especially anything in small print. Be wary of low interest rate quotations well below industry norm. Carefully research the financial institutions brought forth to you by the broker to ensure the mortgage is from a reputable institution rather than an unnamed, unknown source. By signing documents with a broker who does not possess a surety bond, you are basing your rate of risk on their word.
Before working with a broker ask them if they are bonded and for how much. The amount required in each state varies depending on what the dollar value of the mortgages a broker works with is. Typically, the higher overall dollar value, the higher the amount required by a broker. If you find yourself with a broker who does not hold a Mortgage Broker Bond, then demonstrate your aptitude as a consumer and inquire as to why they aren’t bonded, and more importantly, how they intend to have you as a client when they clearly are not concerned about protecting themselves or their clients.