Surety Bond Encyclopedia

Commercial Mortgage Broker Bond - Statewide in Arizona

Brief Summary

A commercial mortgage broker bond in Arizona is either $10,000 or $15,000, and the deciding factor is who funds your loans, not how many you close. If every investor is institutional, you post the lower amount. If even one private lender is in the mix, you post the higher one. Tell us which, and the bond goes out ready to deposit with the deputy director before your first commercial deal.

Every licensed commercial mortgage broker in Arizona must deposit a surety bond with the deputy director of the Financial Institutions Division, Department of Insurance and Financial Institutions, before doing business. A.R.S. 6-903 sets it at $10,000 when the broker's investors are limited solely to institutional investors and $15,000 when they include any noninstitutional investor. Cash or federally insured certificates may be posted instead.

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How to Apply for a Commercial Mortgage Broker Bond:

Decide whether every investor you place loans with fits the institutional investor list in A.R.S. 6-903(L).
Confirm the entity is registered to do business in Arizona.
Provide owner and entity details for the surety's review.
Sign the bond as principal with a surety authorized in Arizona.
Deposit the bond with the deputy director before brokering any loan.
Pay the $500 application fee and the annual renewal fee for your loan count.

Detailed Information About the Arizona Commercial Mortgage Broker Bond:

One question sets the amount

A.R.S. 6-903(K) makes the bond $10,000 for licensees whose investors are limited solely to institutional investors and $15,000 for licensees whose investors include any noninstitutional investor. Subsection L defines institutional investors as banks, savings and loan associations, savings banks, credit unions, federal government agencies or instrumentalities, quasi-federal agencies, financial enterprises, licensed real estate brokers or salesmen, profit sharing or pension trusts and insurance companies. Place one loan with a private individual and the $15,000 figure applies.

Picking the license

Arizona defines a commercial mortgage loan as one secured by a mortgage, deed of trust or other lien on commercial property and created with the owner's consent. A person who brokers only commercial mortgage loans must hold either a mortgage broker license or a commercial mortgage broker license. The bond rules are the same for both. The commercial license does carry one advantage at renewal: it is not subject to the article's continuing education requirements. An applicant that is not a natural person must be registered to do business in Arizona on the date the license is granted.

What the bond covers

The bond is signed by the licensee as principal and a surety company authorized to do business in Arizona. It is conditioned on faithful compliance with the article by the licensee and its directors, officers, members, partners, trustees and employees. It is payable to any person injured by the licensee's wrongful act, default, fraud or misrepresentation, and to the state for that person's benefit.

Instead of a bond, a licensee may deposit cash or certificates of deposit, investment certificates or share accounts insured by the FDIC or NCUA. Deposits are released only on the deputy director's written authorization or a court order, and not before three years after the bond is substituted or the license is surrendered, revoked or expires. The state treasurer may charge up to $10 for each deposit.

Fees

Under A.R.S. 6-126 the application fee is $500. Annual renewal is $250 for a broker that negotiated or closed fifty loans or fewer in the preceding calendar year, $500 above that, plus $200 for each branch office.

Eligibility and Requirements for a Arizona Commercial Mortgage Broker Bond:

Bond of $10,000 with institutional investors only, or $15,000 if any investor is noninstitutional.
Surety company authorized to do business in Arizona.
Bond payable to injured persons and to the State of Arizona for their benefit.
Bond in place before doing business as a commercial mortgage broker.
Arizona business registration for any applicant that is not a natural person.

Arizona Commercial Mortgage Broker Bond FAQs:

Is the bond amount based on loan volume?

No. The bond depends only on your investors. Loan count affects the renewal fee under A.R.S. 6-126, not the bond.

We broker only commercial loans. Do we need a commercial mortgage broker license?

A.R.S. 6-903 lets a person who brokers only commercial mortgage loans hold either a mortgage broker license or a commercial mortgage broker license. Either way the bond is $10,000 or $15,000 based on your investors.

Who counts as an institutional investor?

Banks, savings and loan associations, savings banks, credit unions, federal and quasi-federal agencies, financial enterprises, licensed real estate brokers or salesmen, profit sharing or pension trusts and insurance companies.

Who is exempt from licensing altogether?

A.R.S. 6-902 exempts, among others, banks, credit unions and insurance companies operating under their own regulators, attorneys not principally engaged in negotiating mortgage loans, people lending their own money for their own investment, and institutional investors as defined in A.R.S. 6-971 unless they make a loan that is not a commercial mortgage loan.

Can a cash deposit replace the bond?

Yes. Cash or FDIC or NCUA insured certificates in the same amount are accepted. Plan on that money staying with the state for at least three years after the license ends.