Surety Bond Encyclopedia

Third Party Loan Servicer - NMLS Bond - Statewide in Rhode Island

Brief Summary

Rhode Island sets this bond at a flat $50,000 for every licensed third-party loan servicer, with no tiers by loan count or portfolio size. You pay an annual premium instead of setting aside $50,000 in cash, and the bond is filed electronically through NMLS so it attaches straight to the license record with the Division of Banking.

Every third-party loan servicer licensed by the Rhode Island Department of Business Regulation must file a $50,000 surety bond with its application and keep it in force for as long as it holds the license. The amount is set by R.I. Gen. Laws 19-14-6 and repeated in Banking Regulation 230-RICR-40-10-2.5(C). The license, and so the bond, also reaches a company that owns the servicing rights on Rhode Island residential loans even when another company does the actual servicing.

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How to Apply for a Third Party Loan Servicer - NMLS Bond:

Confirm the company either services Rhode Island residential loans owed to others or owns the servicing rights to them. Either one requires the license.
Create or update the company record in NMLS and file the Rhode Island Third Party Loan Servicer License application there.
Apply for the $50,000 bond using the legal name and NMLS ID exactly as they appear in NMLS.
Provide owner credit information and recent company financial statements for underwriting.
Pay the premium and have the surety file the bond electronically in NMLS.
Pay the $1,100 annual license fee, plus $1,100 for each branch certificate, by December 31 each year.

Detailed Information About the Rhode Island Third Party Loan Servicer - NMLS Bond:

Owning servicing rights is enough to need this bond

R.I. Gen. Laws 19-14-1 defines a third-party loan servicer as anyone who services a loan secured by Rhode Island residential real estate, made for a personal, family or household purpose, that is owed to someone else. The same definition also covers a person or entity that owns the servicing rights to such a loan, whether it services the loan itself or contracts the work out to a subservicer. Investors in servicing rights often assume the subservicer's license covers them. It does not. Section 19-14-2 bars anyone from servicing a loan as a third-party loan servicer without first obtaining a license or registration from the director, and the license comes with the bond.

The amount is flat

Section 19-14-6(b) sets the bond for each third-party loan servicer at $50,000, and the Division of Banking regulation at 230-RICR-40-10-2.5(C) states the same figure. There is no sliding scale for volume, loan count or number of branches.

How the bond works

The bond runs to the State of Rhode Island for the use of the state and of any person who may have a cause of action against the servicer. The surety can cancel by giving the director at least 30 days' notice, and anything the servicer became liable for before the end of that 30 day period stays covered. If the bond is not reinstated or replaced before the cancellation takes effect, the license is suspended. If the servicer does not ask for a hearing within 30 days, the director issues an order revoking the license.

Other conditions that come with the license

Section 19-14-5 requires a third-party loan servicer to maintain a net worth of $100,000. Section 19-14-4 sets the annual license fee at $1,100 for the license and for each branch certificate, due by December 31, with a $25 a day late penalty up to $750. The regulation requires all applications and changes to go through NMLS, quarterly and annual financial statements to be uploaded there, and a Rhode Island agent to be designated to endorse insurance checks unless the servicer will never be a loss payee.

What the bond costs

Rhode Island does not set the premium. The surety prices it after reviewing the owners' credit, the company's financial statements and its servicing history, and it is paid annually.

Eligibility and Requirements for a Rhode Island Third Party Loan Servicer - NMLS Bond:

Bond amount of exactly $50,000 under R.I. Gen. Laws 19-14-6(b).
Bond running to the State of Rhode Island and filed with the Director of the Department of Business Regulation.
Minimum net worth of $100,000 under R.I. Gen. Laws 19-14-5.
Quarterly and annual financial statements uploaded in NMLS under 230-RICR-40-10-2.5.
A Rhode Island agent designated to endorse insurance checks, unless the servicer will never be named a loss payee.
Continuous coverage. A cancelled bond that is not reinstated or replaced leads to suspension of the license.

Rhode Island Third Party Loan Servicer - NMLS Bond FAQs:

We own the servicing rights but a subservicer handles the loans. Do we need this bond?

Yes. R.I. Gen. Laws 19-14-1 includes in the definition of third-party loan servicer a person or entity that owns the servicing rights to a Rhode Island residential loan, whether it services the loan itself or contracts with someone else. That makes you a licensee in your own right, and every licensee files the $50,000 bond.

Does the bond amount go up as our portfolio grows?

No. Section 19-14-6(b) sets one figure, $50,000, for each third-party loan servicer. Portfolio size does not change it.

What happens if the surety cancels the bond?

The surety must give the director at least 30 days' notice. If the bond is not reinstated or a replacement is not filed before the cancellation date, the license is suspended. If you do not request a hearing within 30 days of the suspension notice, the director issues an order revoking the license.

How much does the bond cost?

There is no state rate. The surety sets the annual premium after underwriting, looking mainly at the owners' credit, the company's financial statements and its servicing record.

When is renewal due?

The annual license fee of $1,100 is due by December 31 each year under R.I. Gen. Laws 19-14-4. Late payment carries a $25 a day penalty up to $750. Keep the bond in force without a gap through every renewal.