Surety Bond Encyclopedia

Mortgage Loan Broker - NMLS Bond - Statewide in Tennessee

Brief Summary

Tennessee sizes the broker bond by last year's Tennessee loan volume, and a newly licensed broker starts at $90,000 however small the pipeline. Order the correct tier the first time and the bond can be quoted, signed and ready for your license filing in one pass.

Tennessee requires every licensed mortgage loan broker to keep a surety bond payable to the state under Tenn. Code Ann. 45-13-204. Rule 0180-17-.08 sets the amount: $45,000 for less than $10,000,000 in Tennessee residential loans originated the prior calendar year, $90,000 for $10,000,000 or more but less than $50,000,000, and $135,000 for $50,000,000 or more. Brokers filing in the year the license is issued, or the year immediately after, post $90,000.

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How to Apply for a Mortgage Loan Broker - NMLS Bond:

Total your Tennessee residential loan originations for the prior calendar year to find your tier.
If the license is being issued this year or was issued last year, order the $90,000 amount.
Use the company's legal name exactly as it appears on the NMLS license record.
Complete the bond application and the owner credit review.
Have the bond executed in the form approved by the commissioner and submit it with the license application or renewal.
File applications, amendments and renewals through NMLS, and renew on or before December 31 each year.

Detailed Information About the Tennessee Mortgage Loan Broker - NMLS Bond:

The amount follows your loan volume

Tennessee does not use one flat figure for brokers. Tenn. Code Ann. 45-13-204(d) says the bond must reflect the dollar amount of loans originated, as determined by the commissioner, and the commissioner set the tiers in Tenn. Comp. R. & Regs. 0180-17-.08. Volume means Tennessee residential mortgage loans originated by the licensee in the calendar year immediately before the year the renewal application is filed.

Less than $10,000,000 in loans: $45,000
$10,000,000 or more, but less than $50,000,000: $90,000
$50,000,000 or more: $135,000

New brokers start at $90,000

A broker filing in the year the license is issued, or in the year immediately after, posts $90,000 regardless of volume. The $45,000 tier only comes into play once there is a full prior year of Tennessee originations to measure. A company licensed for more than one activity uses the highest amount required, and the mortgage lender tiers run $100,000, $200,000 and $300,000.

What the bond answers for

The bond is payable to the State of Tennessee, written in a form approved by the Commissioner of Financial Institutions, and issued by a surety qualified to do business in Tennessee. It covers damages caused by a wrongful act, default, fraud or misrepresentation of the licensee, and the statute requires coverage for each mortgage loan originator working under the license. If anyone recovers against it, the broker must file a new bond.

It outlives the license

The bond has to stay in force for at least 24 months after the license expires or is revoked, suspended or surrendered. Closing the company does not end the obligation right away.

Who does not need a license

Tenn. Code Ann. 45-13-201 exempts depository institutions and their federally regulated subsidiaries, licensed attorneys within the federal guidelines, people who make five or fewer residential loans in a 12 month period without holding themselves out as lenders, employers lending to employees as a benefit, and a few others. A broker outside those exemptions applies through NMLS and posts the bond.

Eligibility and Requirements for a Tennessee Mortgage Loan Broker - NMLS Bond:

Obligee: State of Tennessee, through the Commissioner of Financial Institutions.
A surety qualified to do business in Tennessee.
Bond amount of $45,000, $90,000 or $135,000 based on prior year Tennessee loan volume.
Coverage for each mortgage loan originator working under the license.
Bond kept in force for at least 24 months after the license ends.
Tangible net worth of at least $25,000, plus $25,000 for each branch office.

Tennessee Mortgage Loan Broker - NMLS Bond FAQs:

We were licensed last year and closed under $10 million in loans. Can we drop to $45,000?

Not yet. Rule 0180-17-.08 fixes the broker bond at $90,000 for filings made in the year the license is issued or the year immediately after. Once you are past that window, the amount is measured against the prior calendar year's Tennessee residential originations, and less than $10,000,000 puts you at $45,000.

Do loans closed in other states count toward the tier?

No. The rule counts the dollar amount of Tennessee residential mortgage loans originated by the licensee in the calendar year before the renewal application is filed.

We hold more than one Tennessee mortgage license. Which amount applies?

Rule 0180-17-.08 sets the bond at the highest amount required for the combination of activities you are licensed for. A company that is also a mortgage lender is measured against the lender tiers of $100,000, $200,000 and $300,000. Confirm with TDFI how the bond should be written for your license structure.

Can we cancel the bond as soon as we close the business?

No. Tenn. Code Ann. 45-13-204(e) requires the bond to stay in effect for not less than 24 months after the license expires or is revoked, suspended or surrendered.

How is the premium set?

The surety prices the bond from the required amount, the owners' personal credit, the company's financial statements and its history. Moving to a higher tier means a larger bond and a larger premium. You see an actual quote once the application has been reviewed.