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Why is a Texas Mortgage Broker or Loan Servicer Bond Required?
A mortgage broker bond protects Texas consumers from violations of the Texas Mortgage Broker License Act committed by the broker. In the event of non-compliance with the Act, a consumer may file a claim against the bond seeking reimbursement for damages incurred.
Key provisions of this bond include protections related to breach of contract, fraudulent licensing practices, discrimination, improper accounting, and deceitful advertising materials.
Mortgage Broker or Loan Servicer Bonds And Getting Your Texas Business License/Registration
Texas Residential Mortgage Loan Servicers must have be registered to legally conduct business in the state. The state of Texas defines a Residential Mortgage Loan Servicer as any person/entity who:
- Receives scheduled payments from a borrower under the terms of a residential mortgage loan, including amounts for escrow accounts; and
- Makes the payments of principal and interest to the owner of the loan or other third party and makes any other payments with respect to the amounts received from the borrower as may be required under the terms of the servicing loan document or servicing contract.
Pre-requisites for registration application include furnishing a surety bond in the amount of $25,000 for servicing volume of <$25,000,000, or $50,000 for servicing volume of >$25,000,000.
Registration is not required for state or federal depository institution, those registered under Chapter 157 and those who have properly notified the Department of its servicing activities, if licensed under Chapter 342 or regulated by Chapter 343, if the entity does not act as a residential mortgage loan servicer servicing first lien secured loans, or those making a residential mortgage loan with the person’s own funds, or to secure all or a portion of the purchase price of real property sold by that entity.
Additional Texas Mortgage Broker or Loan Servicer Bond Resources & Links
This bond is cancellable at any time by the surety company by providing 30 days written notice to the Texas Department of Savings and Mortgage Lending.