The Hawaii State Legislature signed Senate Bill 1093 into law in April 2015. In order to obtain a mortgage servicer license, mortgage service professionals doing business in Hawaii must now post a surety bond in the amount of $100,000.
Prior to this enactment, prospective mortgage servicers could apply and obtain a license without providing proof of financial security for the consumers they serve. The bond requirement helps ensure business is being conducted in tighter accordance with the law, minimizes fraudulent activity, and implements stricter consequences for servicers committing wrongdoing to borrowers. The revised statutes seek greater accountability including record-keeping procedures faithfully accounting for all funds received for mortgage transactions.
If a borrower experiences wrongdoing or incurs financial damages by doing business with the mortgage servicer, a claim can be filed on the bond thus providing customers formal protection from these transactions that, by nature, involve a higher amount of risk to the customer. The bond agreement holds the mortgage servicer solely liable for reimbursing the surety in a timely and professional manner.
The bond term must run concurrently with the servicer license term dates. There is also a 30-day cancellation clause included in the policy terms requiring written notice submitted to the Department of Commerce and Consumer Affairs in the event the surety or the principal wish to terminate the bond prior to its set date of expiration.
Photo by J Brew (CC BY-SA 2.0)