Michigan Mortgage Broker Bond Overview
Applicants for a number of mortgage broker licenses and registrations in Michigan must provide a mortgage broker bond.
The amount of this bond varies according to the type of license or registration being applied for. Amounts are as follows:
| License type | Bond amount |
|---|---|
| 1st Mortgage Broker and Lender License | $25,000 |
| 1st Mortgage Broker License | $25,000 * |
| 1st Mortgage Broker, Lender, and Servicer License | $125,000 |
| 2nd Mortgage Broker and Lender License | $25,000 |
| 2nd Mortgage Broker and Lender Registration | $25,000 |
| 2nd Mortgage Broker License | $25,000 * |
| 2nd Mortgage Broker Registration | $25,000 * |
| 2nd Mortgage Broker, Lender, and Servicer License | $125,000 |
| 2nd Mortgage Broker, Lender, and Servicer Registration | $125,000 |
* This bond is only required if you will be receiving funds from prospective borrowers
All mortgage brokers in Michigan are regulated by the DIFS, but the process of getting licensed or registered is managed by the Nationwide Multistate Licensing System & Registry (NMLS).
Why do I need to get bonded?
The purpose of this bond is to guarantee your compliance with the provisions of the Mortgage Brokers, Lenders and Servicers Licensing Act, and the Secondary Mortgage Loan Act.
If a bonded mortgage broker violates these laws, then anyone harmed by such violations may file a claim against their bond to request compensation. Compensation extended under a bond claim can be as high as the full penal sum of the bond.
To learn in greater detail about how bonds work, and why they are required, see our ‘What is a surety bond' guide!
To learn more about the cost of your bond, why bond claims happen, and how you can get bonded, see the sections below!
You can always call us at 866.450.3412 if you have any additional questions about the bonding requirements for mortgage brokers in Michigan.
What's the Cost of the Michigan Mortgage Broker Bond?
To get bonded you must pay a certain cost, a so-called surety bond premium. This premium is equal to a small part of the full amount of your bond. Your exact premium is determined by your surety on the basis of the following factors.
How the surety determines your bond premium
The most significant factor that determines the cost of your bond is your personal credit score. This is considered a highly reliable indicator of the likelihood of a claim being made against someone's bond. The higher someone's credit score is, the lower their premium will be.
For example, applicants with very high to good credit scores are typically offered a rate in the range between .5% and 5% of their total bond amount.
Respectively, applicants with low to very low scores are offered rates in the range of 5% to 15%.
Sureties consider it a greater risk to issue bonds for applicants with lower scores which is why they typically require more security in the form of a higher premium. Bond premiums are always set according to the particular financial conditions of an applicant and by improving your credit score, you can get a better rate next time you apply for a new bond.
To get an even better picture, your surety may also request to review your:
- Personal and business financial statements
- Fixed and liquid assets
- Industry experience and record
See the table below to get a sense of your premium, based on your credit score.
| Michigan Mortgage Broker Bond Cost Based on Credit Score | |||||
|---|---|---|---|---|---|
| License Type | Bond Amount | Credit Score | |||
| Above 700 | 650-699 | 600-649 | Below 599 | ||
| Mortgage brokers and lenders | $25,000 | $125-$312 | $188-$375 | $500-$1,250 | $1,250-$1,875 |
| $125,000 | $625-$1,562 | $937-$1,875 | $2,500-$6,250 | $6,250-$9,375 | |
What Causes a Bond Claim?
The various laws that regulate mortgage brokers in Michigan define its purpose as guaranteeing that the licensed broker conducts their business as required in the provisions of the law. The bond is further intended to guarantee for the payment of any money that is due to borrowers, loan applicants and the Commissioner of the Office of Financial and Insurance Regulation.
When a broker violates these conditions by, for example, not making required payments, a claim can be made against their bond. When a claim is made by someone who has suffered a loss, the surety will investigate it to determine its validity.
If the claim is valid, the surety may then step in to compensate claimants, unless the broker does so first. Depending on the nature of the claim, the surety may extend compensation for as much as the full amount of the bond.
If the surety extends compensation to claimants, the broker must reimburse the surety in full. This is a standard condition of all bond agreements and it is in place because sureties do not assume liability for violations of the bond, they only vouch for the party they issue the bond to.
Given how costly and difficult it can be to settle a claim, it is advised that you comply with your bond's conditions at all times.
Apply For Your Bond Here!
To get started with your bond application, click on the banner below. You will then need to complete a brief bond form. We'll then get in touch with you to provide you with a free quote and more information.
For any additional questions about the bonds required of mortgage brokers in Michigan, call us at 866.450.3412!
Further Reading
