Why do mortgage bankers, brokers and lenders need a surety bond?
Over 45 states require Mortgage Bankers, Brokers and Lenders to be licensed. Most of these states additionally require that the licensee provide the state with a financial guarantee that they will act in accordance with the regulations of the state. That guarantee may take the form of an irrevocable letter of credit, but most commonly a licensee will elect to meet the requirement by providing the state with a surety bond naming the state’s regulatory department as beneficiary. Obtaining a surety bond is generally the preferable method for meeting the state’s requirement for a financial guarantee of your performance. The surety company requires that those they bond have the financial resources to meet any the obligations that the bond guarantees, but it allows the licensee to have the unencumbered use of those resources as they engage in their business.
