Surety bonds and insurance policies also differ in
how they pay out when claims are successful. Insurance providers pay benefits to the insured, or the
mortgage broker, up to the policy limits. Surety agencies
pay the broker’s client, or claimant, up to the bond
amount, but then require bondholders to repay that
amount over time.
Because a broker bond is a form of extended credit on
behalf of the mortgage professional, surety agencies
take a close look at a broker’s financial track record.
They want to ensure there are no issues with missed
or late payments, overborrowing through credit cards
or loans, or more significant negative marks like bankruptcies, foreclosures or court judgments.
These signs point to a higher risk for borrowers
working with such a mortgage broker. Surety agencies
are cautious about taking on new brokers with such
credit missteps in their past.
An individual with less-than-perfect credit can still
get a broker bond, but it will likely come at a higher
price. The increased risk a surety company takes on
when providing a bond to a mortgage professional
with bad credit means the cost of the bond, which
is calculated as a percentage of the bond amount, is
higher. There are steps you can take, however, to
ensure you get an affordable mortgage bond — even
with bad credit.
Although it may seem like you are facing a substantial
uphill battle when getting a mortgage-broker bond
with bad credit, you aren’t completely out of luck. The
first step in obtaining a bond that meets your needs
and your budget is to check your credit.
Before applying for your new bond, be sure to know
exactly what is in your credit report and what items
may represent a red flag to the surety company. If
there are entries on your credit report that seem inaccurate, or wrong altogether, work to dispute those
items before submitting your application.
Once you know what is in your credit report and you
resolve any negative entries that are incorrect, your
next step is to work toward establishing good credit.
Improving your credit does not happen overnight, but
what will help is making sure you make payments on
time, use your credit lines responsibly and only take
out the credit you need.
Finally, it is important to work with the right surety
company. You should find one that understands that
credit issues happen; is willing to evaluate other factors,
like your bond-claims history and business financials;
and also can offer you several bond options.
n n n
Getting a mortgage-broker bond is normally a requirement to be licensed in the state where you work, but
the process does not have to be complex or excessively
costly. Know why the bond is needed and how your
credit impacts its price, then be sure to select a surety
company that can help you every step of the way.
Also, take time to understand the differences between surety bonds and insurance, and when each is
needed to protect your business. Taking these small
steps will help you fulfill your promise to the state
and your clients as you continue building a career as a
mortgage broker. n
<< Surety Bond continued from Page 82 “Before applying
for your new bond,
be sure to know
exactly what is in
your credit report
and what items
may represent a red
flag to the surety