SURETY BOND INFORMATION REGARDING THE MORTGAGE LICENSING ACT

On August 5, 2009, Governor Edward G. Rendell signed into law as Act 31 of 2009, House Bill 1654 (P.N. 2448), which amends Pennsylvania’s existing mortgage licensing law, 7 Pa.C.S. Chapter 61, now titled the Mortgage Licensing Act (“MLA”), in order to implement the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the “SAFE Act”), 12 U.S.C. § 5101 et seq. Act 31 became effective immediately. The amendments contained in Act 31 implement the SAFE Act by merging its requirements into the MLA.

This letter provides the mortgage industry with further details regarding the surety bond requirements for mortgage originators and mortgage companies. Licensees will have until November 30, 2009 to provide the department with proof of surety bond coverage as prescribed by the MLA.

Surety Bond Requirement:

The MLA requires mortgage company licensees and applicants (including consumer discount companies and affiliates of banks and credit unions engaged in the mortgage loan business) to maintain a surety bond in an amount that reflects the volume of mortgage loans originated by the mortgage originators employed by the business. The amount of the bond will be determined by the amount of mortgage loans originated and secured by Pennsylvania real property in a calendar year as indicated on the licensee’s annual report. For initial mortgage business applicants, the amount of the bond will be determined by the anticipated amount of mortgage loans originated and secured by Pennsylvania real property in the first calendar year of licensing.

Licensed mortgage originators will be responsible for maintaining an individual surety bond only if their employer is a business that is not required to be licensed by virtue of the MLA (i.e. agencies or instrumentalities of a federal, state or local government, or non-profit corporations) and elects not to maintain the required surety bond on behalf of its licensed mortgage originators. Should individually licensed mortgage originators require individual bonding, the amount of the surety bond required will be determined by the amount of mortgage loan originations secured by Pennsylvania real property in the most recent complete calendar year. For initial mortgage originator applicants, the amount of the bond will be determined by the anticipated amount of mortgage loans secured by Pennsylvania real property originated in the first calendar year of licensing.

The following summarizes the bond requirements:

Mortgage Lenders and Mortgage Loan Correspondents:
Bond Amount Anticipated or Actual Amount of PA Mortgage Loan Originations
$100,000 $29,999,999.99 or less
$200,000 $30,000,000 – $99,999,999.99
$300,000 $100,000,000 – $249,999,999.99
$500,000 $250,000,000 or more

Mortgage Brokers
Bond Amount Anticipated or Actual Amount of PA Mortgage Loan Originations
$50,000 $14,999,999.99 or less
$75,000 $15,000,000 – $29,999,999.99
$100,000 $30,000,000 – $49,999,999.99
$150,000 $50,000,000 or more

Mortgage Originators
Bond Amount Anticipated or Actual Amount of PA Mortgage Loan Originations
$25,000 $7,499,999.99 or less
$50,000 $7,500,000 – $14,999,999.99
$75,000 $15,000,000 – $29,999,999.99
$100,000 $30,000,000 – $49,999,999.99
$150,000 $50,000,000 or more

Note: This separate volume based surety bond requirement does not replace the additional requirement for Mortgage Brokers and Mortgage Loan Correspondents who are accepting advanced fees to obtain a separate bond in the amount of $100,000.

Transition Plan:

Licensees and registrants are invited to visit the department’s website (www.banking.state.pa.us) in order to download the approved surety bond form. All licensees must use this form and obtain coverage from a surety company authorized to do business in PA in order to meet the new surety bond requirements.

Licensees and registrants must submit the original and fully executed surety bond form to the department no later than November 30, 2009.

Send original bonds to the following address:

Pennsylvania Department of Banking
Attention: Compliance Division
Marker Square Plaza
17 North Second Street
Harrisburg, PA 17101
Conclusion:

The Department’s licensing staff is committed to assisting you in this transition. Should you have any questions regarding the MLA or the transition plan, feel free to contact the licensing staff at (717) 787-3717 or email at ra-asklicensing@state.pa.us. For questions regarding NMLS and how to create a record on the system, please contact the NMLS Call Center at (240) 386-4444

Thank you,
Jamie Robenseifner
Chief, Licensing Division
Bureau of Compliance, Investigation, and Licensing