What Is a Mortgage Surety Bond?

State require mortgage brokerages to obtain licenses before they can conduct business. As a prerequisite for that license, many states require a mortgage surety bond, also called a mortgage broker's bond. Here's a quick rundown on what these are.

Significance

A mortgage surety bond ensures that you, as a mortgage broker, will abide by all of your state's rules and regulations.

Function

The bond is meant as a protection for your customers. If a client feels he has been harmed by you, any settlement claim would be paid out by the bond issuer. The issuer would then expect you to reimburse whatever was paid.

Types

The type of mortgage surety bond you need will depend on your state because different states have different regulations.

Providers

Mortgage surety bonds can be purchased from a licensed insurance broker.

Costs

Mortgage surety bonds will typically cost you between 10 cents and 20 cents for each $100 of the bond's amount. That amount varies depending upon factors such as your level of experience and the total net worth of your company.