Chances are, if you mortgage broker is licensed and you can find them on your state’s list of licensed mortgage broker companies, then your mortgage broker has a mortgage broker surety bond. Now let’s talk about what is a mortgage surety bond.
What is a surety bond?
A surety bond is a bond that is a guarantee. Surety bonds are not insurance they are sort of like a form of credit. Mortgage surety bonds are essentially telling the licensing agency (usually the state licensing authority) that the licensed company agrees to pay for any claims that are addressed in the terms of the bond.
Basically, when a mortgage broker gets a mortgage surety bond they are agreeing to pay up to the bond limit if they have a claim filed against them by a customer about something that the mortgage broker did or didn’t do that is covered under the terms and conditions of the surety bond.
Another way to look at this is that a surety bond is a promise made to the licensee (obligee – or state licensing agency) made by the licensor (obligor – the mortgage broker or company) to make good on a violation of the terms and conditions of the surety bond if a valid claim is received by the bond company.
Mortgage brokers need a mortgage surety bond to get licensed.