A mortgage banker's bond is a commercial crime coverage (fidelity bond) required by specific laws, rules that regulate the mortgage banker business with certain federal government agencies and more importantly by the mortgage banker's supporting warehouse lenders. Not to be confused with a mortgage broker bond which is a surety bond required by state statutes in order to obtain a professional license, the mortgage banker bond is a specialty insurance coverage.
While no absolute protection, the mortgage banker's bond is very broad and contains items that are not contemplated under a traditional mercantile fidelity bond. The product is sort of a "hybrid". The Fidelity/Crime coverage parts of the "MBB" generally include but are not limited to:
There is generally a second part, or "side" to the mortgage banker bond which extends to partners, major shareholders, directors, loan closing agents and attorneys. These clauses broaden the above.
All parts and sub-parts are accompanied by certain claims expense and replacement expense coverages. To these basic form insurance provisions, many endorsements may be required. If the mortgage bankers activity can result in a loss affecting the interest of the Government National Mortgage Association, the Government National Mortgage Association then GNMA must be named a joint loss payable. If the operator's business involves Fannie Mae in any way, then a "notification endorsement" must also be affixed to the mortgage banker bond guaranteeing that if the surety cancels the bond or the policy aggregate limits are reduced for any reason other than payment of loss during the term of the mortgage banker's bond that the operator will give thirty (30) days written notice to the Federal National Mortgage Association. Likewise, there are a few state financial institution or services agencies that require joint loss payable endorsements if the banker operates in their state(s).
A warehouse lender is an essential supporting player to mortgage bankers that process any significant volume of loan business. A warehouse lender essentially gives a mortgage banker a line of credit, depending on the sale of mortgage loans to repay the financial institution that backs the warehouse lender's obligations. A warehouse lender will generally require that the mortgage banker bond name it by endorsement as an additional insured. It is not uncommon for a large mortgage banker bond to contain MANY of these endorsements.
Mortgage banker bonds can be complex. Obtaining sufficient coverage for large operations can require primary and excess coverage layers as carrier appetite is often limited. Working with a knowledgeable underwriter is imperative. National surety bond leader, Surety One, Inc. is a specialist in the bonding needs of the mortgage loan origination, banking and brokering services industry. We offer both the surety and fidelity bonds required of mortgage professionals in ALL fifty states, Puerto Rico and the U.S. Virgin Islands. Do you operate in multiple jurisdictions? We can help! Visit us at SuretyOne.com, call (800) 373-2804, email us at Underwriting@SuretyOne.com or click here to discuss your mortgage banker bond needs.
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