3.Surety Bonds Secured by an Originating Entity

Originating entities can maintain surety bonds for the MLOs that they employ. Let's explore that process.

• If an originating entity maintains a bond covering its MLOs, the bond amount must be equal to the aggregate of the individual bonds required for all covered MLOs. 

• Bonds maintained by an originating entity to cover its MLOs are not required to be more than $100,000 if the originating entity has less than 10 covered MLOs, increasing proportionally up to $500,000 if the originating entity has 25 or more covered MLOs.

• An originating entity covering its MLOs must deliver a certification to the Department.

• The Superintendent has the right to require a bond in an amount greater than set forth if the nature of the business requires additional protection for consumers.

• When a recovery is made on a claim or action on or under the bond, a new or supplemental bond restoring the face amount of the bond to the amount required must be obtained immediately.(3)[4]

A Mortgage loan originator (MLO)…

…is an individual who takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan for compensation or gain.

Often, you will see the terms…

…licensed loan originators and registered loan originators. 

While this course is focused on state licensing for loan originators,…

…it is important to understand why and how registered loan originators are exempt from state licensing regulations. 

 Registered loan originators perform the same functions as a licensed MLO,…

…are registered with the NMLS, and maintain a unique identifier, which is the permanent number assigned to an entity in the NMLS. 

The main difference is that they…

…are employed by a bank or other depository institution. 

These institutions and their employees are regulated by a…

…Federal Reserve, the National Credit Union Association, or the Farm Credit Administration. They are exempt from the state licensing requirements for mortgage loan origination.[5]

An application is…

…a request for a residential mortgage loan.