Bond claims change for mortgage brokers.
The bill amends the Fair Mortgage Lending Act. Anyone affected by the actions of a licensed Arkansas mortgage broker will now be able to file a claim against the broker bond up to five years after the broker has ceased operations in the state. This provides extended protection for mortgage buyers who have suffered misuse or fraud by a mortgage professional. Mortgage professionals will also have to meet a different set of licensing requirements.
Some criteria that were needed previously are removed, while new ones have been added. With the new legislation, Arkansas mortgage brokers will now be accountable for mortgage broker bond claims for a period of at least five years after the end of their activities in the state.
The surety bond is one of the main licensing requirements for mortgage brokers across the country. The licensing and bonding in Arkansas are regulated by the Arkansas Securities Department. It requires brokers to post a mortgage broker bond based on their loan activity, with a minimum amount of $100,000. The amendments in the bill allow the commissioner to set the bond amount as deemed necessary. However, the actual submission of the bond still needs to be made via the National Mortgage Licensing System. The bond form is available online.
The bond functions like an extra layer of protection for Arkansas loan buyers. If a mortgage broker fails to abide by applicable laws and engages in misuse and fraud that negatively affect a customer, a claim can be made on the bond. The new legislation clearly states that "any person who has a cause of action" can file a suit on the bond.
If a bond claim is proven, the affected parties can get a reimbursement up to the penal sum of the bond. The surety that has bonded the broker covers the expenses at first, which guarantees that the claimants will receive the compensation. The mortgage broker is then liable to repay the surety in full for all incurred costs.
Besides introducing stricter rules for mortgage broker bond claims, Act 669 makes a number of changes in the licensing for mortgage brokers and other financial professionals in Arkansas.
Previously, the licensing process entailed that the business history, qualifications and financial situation of the applicant and any officers, partners, directors and managing principals must be examined. With the new law, only the applicant and any managing principals must provide their personal and financial information.
A new requirement was added to the licensing as well. Now mortgage professionals need to undergo fingerprinting. It can be used by the FBI and any other relevant authority. The rest of the licensing criteria and fees remain the same.
Additionally, there are some changes that affect mortgage servicers only. When a servicer takes on the servicing rights on a loan, he must disclose to his clients proof of his licensing. He must also provide borrowers with any notice required under the Real Estate Settlement Procedures Act of 1974.
Vic Lance is the founder and president of Lance Surety Bond Associates of Doylestown, Pennsylvania. Email him at Marketing@SuretyBonds.org.