Commercial Mortgage Banker Bond - Statewide in Arizona

Brief Summary

The Arizona commercial mortgage banker bond comes in two sizes, and most applicants only need to answer one question to know theirs: are all of your investors institutional investors? If yes, the bond is $25,000. If any other investor is in the mix, it is $100,000. Either way you pay an annual premium instead of parking cash or a CD with the state.

Every licensed commercial mortgage banker in Arizona must deposit a bond with the Deputy Director of the Financial Institutions Division of the Department of Insurance and Financial Institutions before doing business, under ARS 6-975. The bond is $25,000 when the licensee's investors are limited solely to institutional investors and $100,000 when they include any other investors. Cash or a federally insured certificate of deposit in the same amount may be used instead.

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How to Apply for a Commercial Mortgage Banker Bond:

• Confirm your investor base to set the amount: $25,000 if solely institutional investors, $100,000 if any other investor is involved.
• Check the ARS 6-972 exemptions before applying, since exempt persons do not need the license or the bond.
• Have the legal entity name exactly as it will appear on the DIFI license application.
• Provide owner names, home addresses and Social Security numbers, plus company financial statements, for underwriting.
• Review the quote, pay the premium and receive the executed bond.
• Deposit the bond with the DIFI Financial Institutions Division before doing business, with the $1,000 application fee plus license fee.

Detailed Information About the Arizona Commercial Mortgage Banker Bond:

Which amount applies to you

ARS 6-975 sets two figures. The bond is $25,000 for a licensee whose investors are limited solely to institutional investors, and $100,000 for a licensee whose investors include any other investors. ARS 6-971 defines an institutional investor as a person who in the regular course of business makes commercial mortgage loans of more than $250,000 funded exclusively from its own resources. If even one of your investors falls outside that definition, you are in the $100,000 tier.

Who needs the license

A commercial mortgage banker is a person who originates or services commercial mortgage loans, or directly or indirectly makes, negotiates or offers to make or negotiate them. A commercial mortgage loan is one secured by a mortgage, deed of trust or other lien on commercial property created with the owner's consent. ARS 6-973 says no one may act as a commercial mortgage banker in Arizona without a license.

Who is exempt

ARS 6-972 lists the exemptions. They include institutional investors themselves, a lender that funds commercial mortgage loans but has no place of business in Arizona and does not solicit borrowers or take part in negotiating the loan, sellers who carry back financing on their own property, attorneys not principally engaged in negotiating commercial mortgage loans, persons licensed under the state's other mortgage articles, government agencies, certain SBA certified nonprofit economic development corporations, and banks, credit unions, insurance companies and other regulated financial institutions.

What the bond covers

The bond secures faithful compliance with the commercial mortgage banker article by the licensee and its directors, officers, members, partners, trustees and employees. It is payable to any person injured by the wrongful act, default, fraud or misrepresentation of the licensee or its employees, and to the state for that person's benefit. One bond covers the entity no matter how many officers or directors it has. A suit on the bond must be brought within one year of the act, except that fraud or mistake claims follow the limitation period in ARS 12-543.

Cash or CD instead

The licensee may deposit cash or a certificate of deposit from a bank, savings institution or credit union fully insured by the FDIC or its successor, in the same amount as the bond. That deposit is not released until three years after the license is surrendered, revoked or expires.

Other qualifications that come with it

The bond sits alongside the other licensing standards in ARS 6-973: three years of experience in commercial mortgage banking or a related field, a net worth of at least $100,000 at all times, and audited financial statements, with unaudited GAAP statements allowed for a licensee funded exclusively from correspondent contracts with institutional investors.

Fees and renewal

The DIFI forms and fees schedule lists a new commercial mortgage banker application at $1,000 plus a license fee based on submission date, a branch application at $500 plus a license fee, and renewal at $1,250 with $250 per branch. Under ARS 6-980 a license not renewed by December 31 is suspended, and one not renewed by January 31 expires, which means applying for a new license. DIFI charges a late fee of $25 per day for renewals submitted between January 1 and January 31.

How the premium is set

The surety looks at the bond amount, the credit of the owners, the company's financial statements and net worth, and its experience in commercial lending. The exact annual premium is shown on your quote before you buy.

Eligibility and Requirements for a Arizona Commercial Mortgage Banker Bond:

• A surety company authorized to do business in Arizona.
• Bond of $25,000 or $100,000 depending on whether investors are limited solely to institutional investors.
• Deputy Director of the DIFI Financial Institutions Division as the party the bond is deposited with.
• Net worth of at least $100,000 maintained at all times, and audited financial statements unless the correspondent contract exception applies.
• Three years of commercial mortgage banking or related experience.
• Renewal by December 31 each year to avoid suspension.

Arizona Commercial Mortgage Banker Bond FAQs:

Official and Additional Resources for the Arizona Commercial Mortgage Banker Bond: