Mortgage Servicer ($500,000) Bond - Statewide in Pennsylvania

Brief Summary

Pennsylvania sets the mortgage servicer bond at a flat $500,000. There is no volume tier and no smaller bond for a small portfolio. It has to be in place before the Department of Banking and Securities issues the license, and it sits alongside a $250,000 net worth floor and a separate fidelity bond that follows Fannie Mae or Freddie Mac guidelines.

Under 7 Pa.C.S. 6131(k)(4), every Pennsylvania mortgage servicer licensee must obtain and maintain a $500,000 surety bond before the Department of Banking and Securities issues the license. The bond runs to the Commonwealth and is for the use of the Commonwealth and injured consumers. Master servicers and subservicers both need the license. A licensed mortgage lender does not, as long as it originated, negotiated and owns all the loans it services.

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How to Apply for a Mortgage Servicer ($500,000) Bond:

• Confirm whether the company needs the license as a master servicer, a subservicer or both.
• Document a net worth of at least $250,000 and fidelity bond coverage that follows Fannie Mae or Freddie Mac guidelines.
• Use the full legal business name and address exactly as they appear in NMLS.
• Provide company financial statements and owner details for the surety's underwriting review.
• Pay the premium and receive the executed $500,000 bond.
• Submit the bond with the NMLS license application before the Department issues the license.

Detailed Information About the Pennsylvania Mortgage Servicer ($500,000) Bond:

A flat $500,000

Pennsylvania lender and broker bonds rise and fall with origination volume. The servicer bond does not. Section 6131(k)(4) of the Mortgage Licensing Act says the amount of the bond shall be $500,000. The bond must come from a surety company authorized to do business in Pennsylvania, be in a form acceptable to the Department, and be in place before the license is issued. It runs to the Commonwealth and is for the use of the Commonwealth and of injured consumers. It cannot be canceled unless the Department receives notice of intent to cancel at least 30 days ahead.

Who needs the license

The Department's mortgage servicer FAQs say a license is needed by any person who engages in the mortgage loan business by directly or indirectly servicing a mortgage loan, as a master servicer or a subservicer. If you own master servicing rights and use a subservicer, both of you need a license.

The main carve out is for lenders. Under 7 Pa.C.S. 6111, a licensed mortgage lender may act as a servicer without a separate servicer license for mortgage loans it has originated, negotiated and owns. The Department's FAQ puts it plainly: no servicer license is needed as long as the lender originated, negotiated and owns all the loans it services. Section 6112 separately excepts persons such as banking institutions and credit unions from the licensing chapter.

The rest of the license file

Section 6131(k) also requires the applicant to be approved by, or meet the current eligibility criteria for approval as a residential mortgage loan servicer of, at least one federal government sponsored entity, government corporation or federal agency. The applicant must establish a minimum net worth of $250,000 and maintain it, carry fidelity bond coverage that follows Federal National Mortgage Association or Federal Home Loan Mortgage Corporation guidelines, and designate a qualifying individual for the principal place of business. The fidelity bond is a separate requirement and does not replace the $500,000 surety bond.

Fees and renewal

Section 6132 sets the initial license fee at $2,500 for the principal place of business plus $1,250 for each branch, and the annual renewal fee at $1,000 plus $500 per branch. The Department requires mortgage licensees to apply for and manage their licenses through NMLS. Licenses renew each year on the licensee's renewal date under section 6134.

Eligibility and Requirements for a Pennsylvania Mortgage Servicer ($500,000) Bond:

• $500,000 surety bond under 7 Pa.C.S. 6131(k)(4), with no volume tiers.
• Surety company authorized to do business in Pennsylvania, on a bond form acceptable to the Department of Banking and Securities.
• Bond runs to the Commonwealth of Pennsylvania.
• No cancellation without at least 30 days notice to the Department.
• Separate fidelity bond coverage and a $250,000 minimum net worth.

Pennsylvania Mortgage Servicer ($500,000) Bond FAQs:

Official and Additional Resources for the Pennsylvania Mortgage Servicer ($500,000) Bond: