Bond Amount Changing for Montana Mortgage Servicers

The bond amount for Montana mortgage servicers is changing

The Montana state legislature passed House Bill 107 on March 19, which changes the bond amount required for mortgage servicers to receive a license. Mortgage servicers are defined by the Nationwide Multistate Licensing System as being entities that engage in the business of receiving periodic payments from a person pursuing a residential mortgage. Previously, the Montana Division of Banking and Financial Institutions set the bond amount at $100,000. With the passage of the new legislation, the amount can now range between $75,000 to $350,000 and is based on the mortgage servicer’s total unpaid principal balance.

How much will my surety bond cost?

The bond amount is calculated by looking at the total amount of unpaid residential loans the company has as of December 31.

  • For a balance of less than $25 million, a $75,000 surety bond is required.
  • For a balance of more than $25 million, but less than $100 million, a $150,000 surety bond is required.
  • For a balance of more than $100 million, but less than $500 million, a $250,000 surety bond is required.
  • For a balance of more than $500 million, a $350,000 surety bond is required.

These bonds are subject to underwriting, which means that the surety group must review the financial history of the applicant before issuing the bond. The main component of underwriting is the applicant’s credit. Those with excellent credit will typically pay less in premium—roughly 1-3% of the total bond amount—and are more likely to be approved for a surety bond. It is still possible to get a surety bond with a lower credit score, but the applicant will typically be quoted at a higher rate. However, if their credit improves over time, the mortgage servicer may receive a better rate on their bond when renewing in subsequent years.

How to become a licensed mortgage servicer in Montana

The licensing process for mortgage servicers in Montana is done solely through the Nationwide Multistate Licensing System. The first requirement to become a mortgage servicer is to have a tangible net worth of $1 million. Next, the applicant must calculate their total unpaid principal balance to determine the required surety bond amount. After fulfilling the net worth and surety bond requirements, potential mortgage servicers need to complete a criminal and civil background check as well as a credit check. They also need to prove that they have a trust account for borrower funds. All of this information will need to be submitted in an electronic application to the NMLS, along with an $850 application fee.

What if a mortgage servicer doesn’t meet the net worth requirements?

There is another surety bond option that can be used in place of the required capital to become a mortgage servicer. Mortgage servicers that are not involved with any governmental agencies are required to maintain a tangible net worth of $1 million, but can also fulfill this requirement by having a $1 million surety bond on file. This means that if you fall short of this requirement and still want to become a mortgage servicer, you can still do so with the purchase of this bond.

Need a surety bond in Montana?

Although the bond amount may have changed, the experts at SuretyBonds.com have years of experience issuing surety bonds for Montana mortgage servicers, meaning they can get you the bond you need while saving you time and money. Call 1 (800) 308-4358 or visit SuretyBonds.com today to find out how much you can save on your Montana mortgage service bond.

About the Author

Karie Schmitz
Karie is a senior at the University of Missouri - Columbia studying strategic communication with a focus in marketing. She is a member of the digital marketing department for SuretyBonds.com, a leading provider of online bonding for clients nationwide.