Going After a Mortgage Brokers Bond for Non-Payment

Mortgage brokers are the middle men between the lender and the borrower to source out mortgage loans. The work done by a mortgage broker differs between each. It depends on their personal skills and the amount of liability their willing to take on. However, there are the usual tasks that most mortgage brokers perform.

Duties

Mortgage brokers have to first attract the clients. This is done through marketing. Once a client has been obtained, they have to assess the client’s situation. This includes their credit rating and their income (if they can afford it). With the client’s situation in mind, the mortgage broker has to then find the product that best suit’s the client. This is done by looking at the market and finding out about each of the products available. Once the product has been found, the mortgage broker has to get the approval of the lender (owner of the product). However, this is only a pre-approval.

To be fully approved, the broker then needs their client’s necessary documents. This includes bank statements and income slips, to name a few. As soon as these documents have been obtained, the lender will give an application form, which needs to be truthfully completed. The legal aspects of the deal will then be explained to the client. Lastly, all the information is submitted to the lender tending their approval/rejection.

The mortgage market is very competitive, there are over 53,000 different companies offering mortgage brokers. Hence, 63% of mortgage loans approved in the United States are through mortgage brokers. Even though the mortgage broker industry is under the regulation of close to forty-nine state laws, ten federal laws and five different federal enforcement agencies there have been cases of fraud and predatory mortgage lending. Thus mortgage broker bonds are entered into just in case there are cases of non-payment.

Mortgage broker bonds

Mortgage broker bonds are a form of surety bonds. Surety bonds constitutes a contract between three different parties. There is first the principal. The principal is the main party, they are the one that will actually perform the given task listed in the contract. There is then the surety. The surety is the party that will make sure principals task is done. Lastly, there is the obligee. The obligee is the party whose tasks are being performed by the principal party.

In the case of mortgage broker bonds, the principal party is the mortgage broker itself, the surety is the mortgage brokers company or if a private broker an insurance company and the obligee is the client obtained by the mortgage broker. If the mortgage broker fails to complete the terms of the contract and has not paid then the obligee can go after a mortgage brokers bond for non-payment. There have been numerous cases of mortgage fraud thus obligees going after a mortgage brokers bond has been heard of.

When the principal defaults on their payment, the surety has to pay on their behalf. This is party of any mortgage brokers bond and it is referred to as the penal sum.

This article has explained what a mortgage broker is and the tasks they undertake. As well as that, the specifics of a mortgage broker bond has been discussed. Lastly, the ways in which an obligee can use a mortgage broker bond to their advantage has been explained.