Alabama Mortgage Broker Bond
Alabama Mortgage Broker Bond
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- To be posted to the Alabama State Banking Department
- Required of applicants for a mortgage broker license
- Protects the public and the state from brokers who commit fraud
- Guarantees financial compensation to claimants
Overview of Alabama Mortgage Broker Bond Requirements
According to the Alabama Mortgage Brokers Licensing Act, applicants for an Alabama mortgage broker license may be required to post a mortgage broker bond to the State Banking Department.
Mortgage broker bonds are agreements between a mortgage broker, a surety bond company, and the state of Alabama. They guarantee that if the mortgage broker violates the provisions of the Licensing Act, any parties harmed by those actions can file a claim against the bond. The bond company guarantees that it will cover any costs and damages that results from the broker’s actions. By signing the agreement, the broker agrees to repay the surety for any compensation it extends if the broker should violate the law.
According to Section 5-25-5 of the Licensing act, the Board may find that in order to fulfill the requirements of the Alabama Secure and Fair Enforcement for Mortgage Licensing Act, a license applicant needs to post a bond in an amount determined by the Board.
Alabama Mortgage Broker Bond Cost
The bond amount, or penal sum, of the bond is the maximum amount of compensation that is guaranteed by a surety bond to bond claimants (or bond obligees).
The Licensing Board of Alabama typically requires applicants for a mortgage broker license to demonstrate a minimum net worth of $25,000. In certain cases, such as if the applicant is unable to demonstrate such net worth, the Board may instead require applicants to submit a surety bond whose penal sum is determined by the Board on an individual basis.
The cost of obtaining your bond is different from its penal sum, though. The cost, or premium, is only a small percentage of the total amount. It can be as little as 0.5% of the total amount, for applicants who have a very high credit score. For applicants with lower credit scores, the percentage is higher.
The cost of your bond is most strongly influenced by your credit score. Your financial statements and credit report, as well as your assets and liquidity, also play a part in influencing the rate you are offered on your bond. This means that even if your score isn’t very high, you could still get a good rate on your bond.
