The New York Banking Department has implemented emergency regulations concerning registration and bonding for mortgage loan servicers operating in the state. Under the regulations, all mortgage loan servicers in the state must register with the Banking Department and file both a surety bond and fidelity bond. The details of the regulations are explained below.
Application for Registration
To successfully register as a mortgage loan servicer in New York, applicants must submit a complete application through the Nationwide Mortgage Licensing System. Applications must be accompanied with an investigation fee ($3,000), fingerprint processing fee ($102.25), NMLS processing fee ($100) and a fee for each branch office ($500 per location). Registration must include, but is not limited to, the following components:
- Company (MU1) Form
- Designation of qualifying individual
- Corporate financial statements
- Certificate of Good Standing
- Personal financial statements
- Litigation affidavit
- Background report
- Management and organization charts
- Certificate of Compliance
For a comprehensive list of documents required, check out the NMLS checklist for New York mortgage loan servicer registration. Once the application is approved, but prior to registration, applicants must submit a surety bond in the proper amount.
Financial Responsibility Requirements
Mortgage loan servicer applicants must meet financial responsibility requirements in three respects: net worth, surety bond and fidelity bond / errors & omissions coverage.
- Net worth: Mortgage loan servicers must maintain a net worth of at least $250,000 plus 1/4 of 1% of the outstanding principal balance of aggregate mortgages serviced. At least 10% of the net worth required ($25,000) must consist of cash, cash equivalents or readily marketable securities.
- Surety bond: Upon application approval, applicants must file a surety bond of at least $250,000 with the department. If the Superintendent of the Banking Department determines the mortgage loan servicer has caused consumer complaints of misconduct through unsound business practices, he or she may require a surety bond twice the normally required amount. This bond helps ensure the principal (mortgage loan servicer) adheres to all applicable laws, including Article 12-D of the Banking Law and Part 418 of the Superintendent’s Regulations. Should the principal break the terms of the bond, the surety will cover for all damages incurred up to the penal sum of the bond, however the principal must reimburse the surety for all damages paid out.
- Fidelity bond/errors & omissions coverage: Mortgage loan servicers must file a fidelity bond with the department to cover losses arising from fraud, embezzlement, misplacement, forgery and such. They must also file errors & omissions coverage to cover losses due to negligence regarding the payment of real estate taxes, hazard and flood insurance or the maintenance of mortgage guaranty insurance. The amount of coverage varies according to information in the annual Volume of Servicing Report (VOSR) in the second year prior to the fidelity bond and E & O coverage (For 2015 bond, information from the 2013 VOSR). The required amount of coverage is $300,000 if the aggregate amount of NY loans serviced is $100,000,000 or less; plus .15% of the next $500,000,000; plus .125% of the next $400,000,000; plus .10% of the amount over $1 billion. The coverage may provide for a deductible amount of $100,000 or 5% of the face amount of the bond or coverage, whichever is greater.