Why are Mortgage Servicers required to be licensed?
One of the costliest purchases a person makes is their home. A significant portion of New Jersey foreclosures happened due to mortgages being serviced by individuals inadequately trained or those utilizing unethical practices. As an effort to protect consumers from fraud, New Jersey Bill A-4997 (active July 28, 2019) requires nonbank mortgage servicers be licensed.
New Jersey Bill A-4997 requires mortgage servicers be licensed to minimize unethical practices and reduce the foreclosure rate.
What are the New Jersey Mortgage Servicers Licensing requirements?
- The New Jersey Department of Banking and Insurance issues the Mortgage Servicer licenses. New business applicants must create a record in the Nationwide Mortgage License System (NMLS) to get a unique identifier.
- The applicant must identify a qualified individual for the main office and a branch manager for each branch office. They each need to have a minimum of 3 years of experience in the mortgage servicing business within the last 5 years of submitting the licensing application.
- The application must have no material misstatements.
- The applicant or their branch managers must not have been convicted or plead guilty to a domestic, foreign or military court felony within the previous 7 years of the application date.
- Applicant must have a $100,000 surety bond for the main office and for each of the branch offices. A fidelity bond and errors and omissions (E&O) insurance policy is also required.
- The initial license fee is $1,000 and will expire at the end of the year it was approved. If the applicant is approved Nov. 1 or later, the license will expire the following year. The renewal license fee is $3,000, but is valid for a 3 year term.
- The Commissioner of Banking and Insurance may have additional requirements for applicant to meet.
Who is exempt from New Jersey Bill A-4997?
Mortgage servicers not employed by a federally insured bank or credit union are required to be licensed through the New Jersey Department of Banking and Insurance. Individuals who are currently licensed New Jersey mortgage lenders or only service 5 or less residential mortgage loans within a year are also exempt from these requirements.
Nonbank mortgage servicers are now required to be licensed under New Jersey Bill A-4997.
What is a Mortgage Servicer Surety Bond?
The state requires a $100,000 mortgage servicer license surety bond to ensure license holders stay in compliance of the Mortgage Servicer Licensing Act. In the event a license holder infringes on their agreement with a mortgagor, a claim can be filed against the license holder by the mortgagor. If the claim is found to be valid, the surety will pay the claimant up to the full amount of the bond and it is the mortgage servicer’s responsibility to repay the surety in full.
The applicant does not need to pay the full $100,000 bond amount for their surety bond. The cost of the bond is dependent on all business’ owners credit and financial statement information. You could pay as low as 1% of the surety bond amount purchasing your mortgage servicer license bond through Surety Solutions, A Gallagher Company.
Our team at Surety Solutions, A Gallagher Company can also assist you with your required fidelity bond and E&O insurance policy. Give us a call at 866.722.9239 or send an email to firstname.lastname@example.org and talk to a bond expert today!