by Chris on March 5, 2010
Appraisal management companies wanting to do business in New Mexico must now post a surety bond in order to secure a license.
Part of a nationwide crackdown on AMCs, New Mexico became the latest state to usher in tighter restrictions on the once loosely regulated industry. Signed into law this week by Gov. Bill Richardson, the bill requires AMCs to obtain a $25,000 surety bond to be posted with the state Regulation and Licensing Department.
In addition, the New Mexico measure:
- Requires AMC employees be “geographically competent” to review appraisals
- Adopts fee disclosure requirements similar to recently adopted FHA requirements
- Prohibits AMCs from indemnification against liability or enforcing hold harmless provisions
The new regulations in New Mexico come as states continue to consider measures that provide consumers with greater protection against runaway AMCs.
Six states enacted new AMC regulations in 2009. Industry officials anticipate as many as 20 more states may do so this year.
This spring, Utah and Arkansas became the first states to fully regulate appraisal management companies through their state’s real estate appraiser boards. Four more states enacted similar legislation by the fall, and industry experts anticipate as many as 20 more states to consider AMC legislation in 2010.
Arkansas was the first state to include a surety bond requirement.
“There is a significant belief out there that mortgage fraud played a significant role in the meltdown in the housing market, and any unregulated entity that is out there presents the possibility for mortgage fraud to creep back into the system,” said Scott DiBiasio, manager of state and industry affairs for the Washington, D.C.-based Appraisal Institute, told Insurance Journal last year. “I think legislators recognized that this was a gaping loophole that needed to be corrected.”
Image: Neubie
by Chris on March 4, 2010
That’s among the most common questions we receive at SuretyBonds.com.
It tends to produce a rather unsatisfactory answer, although it’s true nonetheless. The reality is that the cost of a surety bond is going to depend on a host of factors, including the type of bond you’re seeking and what kind of financial background you possess.
Some bonds are considered near no-brainers. These are often low-cost, low-risk surety bonds that give underwriters little pause. But some of the costlier and more high-risk opportunities trigger a significant examination and increased degree of scrutiny.
Sureties, like insurance companies, aren’t in the business of losing money. Very rarely will a surety take a loss. Because of that, the bond premium is typically meant to cover pre-qualification services, namely the underwriting. To keep their exemplary track record in place, underwriters scour financial documents and other key information items when analyzing an application.
In general terms, premium costs for bonds might range from 1 to 4 percent. Applicants who fail to meet certain benchmarks may wind up in a high-risk market, where consumers can pay anywhere from 5 percent to 20 percent of the bond amount.
There’s no hard and fast rule that surety officials can point to and divine a total cost. Market conditions and an individual consumer’s financial conditions can change suddenly and without warning.
Check out our Frequently Asked Questions section to learn more. Consumers can also find out what rate they’re eligible for (with no obligation) by filling out our automated bond form.
Image: borman818
The U.S. Formula One racing team has run into trouble: as the 2010 racing season nears its championship race in Bahrain, its car is unfinished, it’s low on cash, laying off staff, and has only one driver signed up. Its hopes for keeping its F1 racing slot for 2011 now rest on a “substantial, seven-figure surety bond” the U.S. team has offered to Formula One’s governing body, the Paris-based Federation Internationale de l’Automobile, or FIA. The bond assures the FIA that the U.S. team will appear in Formula One races next year or pay the bond amount.
Industry-watchers including Racin’ Today have described the use of a surety bond to secure a slot on the FIA circuit as “plowing new ground.” Motor Sport magazine identified the funder of the bond as team backer and YouTube founder Chad Hurley. Because it’s so new, some observers haven’t known quite what to make of this move. On the blog G-Force, race fan Ciaran Moriarty commented, “that constitutes a bribe.”
Those more familiar with surety bonds know they aren’t a bribe, but a financial guarantee that if a party (the U.S. Formula One team, in this case) fails to perform for another organization (the FIA), then they will pay for the loss suffered by their failure to perform as promised.
It is unusual to see a bond this large outside of the world of public construction projects. But the size of this bond speaks to the big-money stakes of Formula One racing. Hopefully, the U.S. team will get their racing plans back on track, and the bond will never need to be called.
Race fans are still waiting to see if the FIA will accept the U.S. team’s bond as a guarantee it will race in 2011.
Photo source: Flickr user StuSeeger
by Chris on February 26, 2010
SBA officials plan to host a 60-minute web chat next week on how small businesses can win federal contracts and obtain the necessary surety bonds.
The chat facilitators are Karen Hontz, of the Office of Government Contracting and Business Development, and Pam Swilling, with Office of Surety Guarantees at the U. S. Small Business Administration.
The chat begins at 1 pm. EST on Thursday, March 4. To join in, participants should to to the SBA web site and click “Online Business Chat.” Those interested in submitting questions in advance can do so here.
Entrepreneurs can review older web chats by visiting the SBA’s archive.
Mixed martial arts is a rough sport. State legislatures are increasingly taking note and requiring promoters have surety bonds to protect against possible damage to people or property during matches.
The latest state to look at MMA regulation is Iowa, where state Sen. Bill Heckroth said a 17-year-old in his district “got the living snot knocked out of him” at an unregulated match and ended up with a $20,000 medical bill.
Interviewed by a local paper, some MMA facility owners and promoters conceded regulation could be good for their industry, cleaning up its current image as a Wild-West setting for bloody, anything-goes matches. Iowa is proposing fight organizers carry a $5,000 surety bond, provide proof of medical and life insurance for fighters and turn over a percent of their gate receipts for a state athletic fund, among other measures.
Other states have already taken action to regulate MMA bouts and require surety bonds.
Kentucky’s 2008 sports promoter law covers kickboxing and MMA events and requires a $5,000 bond.
Image: michelle nault
by Chris on February 24, 2010
A Florida consumer protection attorney is urging state legislators to enact new protections for homeowners bitten by faulty contractors. Chief among his suggested measures is a new surety bond requirement.
The state’s construction lien law places an unfair burden on consumers, who are basically the only party left unprotected when a contractor or subcontractor fails to follow through on a job, Jacksonville attorney Steven Fahlgren recently told the Orlando Sentinel.
“This is an example of the golden rule: those with the gold make the rules,” Fahlgren told consumer columnist Greg Dawson.
Dawson’s column briefly tells the story of Winter Park resident Shari Sujka. After a contractor failed to make good on payments to subcontractors, Ms. Sujka was on the hook for $6,000 to avoid a lien against her home.
Dawson contends her story illustrates “the gross miscarriage of justice that is Florida’s construction lien law,” where only the homeowner is left in the lurch.
“The contractor gets his money,” Dawson writes. “The subcontractor has the lien law to pressure the homeowner to pay for his services. The homeowner gets the shaft — and a bill from the subcontractor that he already paid once to the contractor.”
Fahlgren, the consumer protection attorney, is pushing for the Florida Legislature to broaden its narrow construction lien law and add some additional protections, including:
- Mandating that all contractors post a $100,000 surety bond
- Doubling the amount (from $50,000 to $100,000) consumers can obtain from the state’s recovery fund
- Allowing consumers to recover legal fees from the recovery fund
Dawson expressed little optimism that the movement would gain traction among the state’s elected officials.
Image: Kyle May
