Mortgage Brokers and Mortgage Bankers: The Bonds You Need
The majority of bonding companies lump mortgage broker bonds, and mortgage banker bonds under the same bonds type. Though they are very similar in many ways there also are a few differences.The first thing we should probably look at is what the differences are between mortgage bankers and mortgage brokers. A mortgage broker is the middle man in the loan. The broker is the person who collects the information of the principle, bring it to the bank dissect the programs and find the best fit for the principal. A mortgage banker on the other hand plays the role of both the broker and the bank. The mortgage banker actually lends the money for the loan to the principal. With this basic understand of these two business operate we can look at further similarities and differences. First, a look at the bond forms for these two businesses.A bond form is a document required by the state with language that explains the specific guarantee of the bond (a surety bond by definition is a guarantee of something; this is laid out in the form). Most states have different bond forms for mortgage brokers and mortgage bankers; though the language in these two bond form tends to be very similar. Georgia is a perfect example of this, and not for a good reason. Both bond forms for Georgia are missing language called an aggregate clause. Because of this, both bonds are rejected by most bonding companies due to the bond language. Next a look at the bond amounts.One thing that sticks out to most is the difference in required bond amounts. The majority of states require larger bond amounts of mortgage bankers. It is not uncommon to see state to require two to three times the amount for mortgage banker bonds (when compared to mortgage broker bonds). Of no surprise this very fact maker qualifying for mortgage banker bonds more difficult.Because of this difference in bonds amounts it is easy to assume that mortgage bankers are more of a risk, just the fact that they actually lend the money seems to point to this conclusion. That said it is interesting to note that historical loss ratios show that mortgage brokers and mortgage bankers are very similar. While there is an increased risk for mortgage bankers, it appears that this risk is offset by other regulations that make it difficult to start a mortgage banker business. It is the similarities in loss ratios that allow bonding companies to write both these bonds in the similar fashion.With the above information you can see how similar these two businesses are. Whether you are applying for a mortgage broker, or mortgage banker bond, make certain that your agent knows what markets are currently best for these classes of business.For more information on this and other topics please visit http://www.bryantsuretybonds.com/suretybonds.htm
About the Author
Todd Bryantis President of Bryant Surety Bonds, Inc.Bryant Surety Bonds, Inc. Visit their website at: http://www.bryantsuretybonds.com
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