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Introduction
An Arkansas mortgage is a legal agreement used in the state of Arkansas where a borrower pledges real property as collateral to secure a residential or commercial loan. Governed by Arkansas real estate and lending laws, mortgages in Arkansas allow lenders to place a lien on property until the loan is fully repaid. Mortgage professionals—including bankers, brokers, and servicers—must be licensed by the Arkansas Securities Department and comply with the Arkansas Fair Mortgage Lending Act to operate legally.
Explanation: Arkansas Mortgage Bond
The Arkansas Mortgage Bond is a surety bond required by the Arkansas Securities Department (ASD) for businesses and individuals licensed to operate as:
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Mortgage bankers
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Mortgage brokers
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Mortgage servicers
This bond ensures compliance with the Arkansas Fair Mortgage Lending Act (Arkansas Code Annotated § 23-39-501 et seq.) and protects the public and state from financial losses caused by violations of the law.
Purpose of the Bond
The Arkansas Mortgage Bond:
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Protects consumers from dishonest or illegal actions by mortgage professionals.
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Ensures mortgage companies adhere to state regulations, including proper loan origination, brokering, and servicing practices.
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Provides a financial remedy to affected consumers or the state if the licensee commits fraud, misrepresents terms, or violates lending laws.
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Who Needs the Arkansas Mortgage Bond?
Entities or individuals applying for a license to operate as a:
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Mortgage Banker – Originates and funds residential mortgage loans.
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Mortgage Broker – Arranges mortgage loans for consumers.
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Mortgage Servicer – Manages loan payments and customer accounts.
All must post a bond as part of the licensing process through the Nationwide Multistate Licensing System (NMLS) and Arkansas Securities Department (ASD).
Bond Amount
The required bond amount depends on the volume of business and is determined by the Arkansas Securities Commissioner.
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Parties Involved
- Principal – The licensed mortgage broker, banker, or servicer.
- Obligee – Arkansas Securities Department.
- Surety – The bonding company that guarantees payment in case of default or misconduct by the principal.
Claims on the Bond
If a licensee:
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Engages in fraudulent or deceptive practices
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Violates Arkansas mortgage lending laws
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Fails to properly manage or disburse client funds
then a claim may be filed against the bond. If the claim is validated, the surety pays up to the bond amount, and the licensee must reimburse the surety.
Process of Getting the Arkansas Mortgage Bond
Here is a step-by-step guide to obtaining the Arkansas Mortgage Bond:
Step 1: Determine License Type
Identify the license type you need through the Nationwide Multistate Licensing System (NMLS):
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Mortgage Banker License
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Mortgage Broker License
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Mortgage Servicer License
Step 2: Determine Required Bond Amount
The Arkansas Securities Department will determine the bond amount.
Step 3: Contact a Licensed Surety Bond Provider
Request a quote from a licensed surety bond company or bond broker.
Step 4: Submit the Bond via NMLS
Upload the executed surety bond through the NMLS portal.
Conclusion
The Arkansas Mortgage Bond is a financial and legal safeguard required for all mortgage professionals licensed in the state. It promotes trust in the residential mortgage market and protects consumers from unlawful or unethical business practices.
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Frequently Asked Questions (FAQs)
Can claims be filed against the bond?
Yes. If a licensee commits fraud, mismanages funds, or violates mortgage regulations, affected parties may file a claim against the bond for financial restitution.
How long is the bond valid?
The bond must remain active and in force for the entire duration of the license. It is typically renewed annually.
What happens if the bond is canceled or lapses?
The licensee may face license suspension or revocation if the bond is canceled or not renewed, as maintaining the bond is a condition of licensure.
Can I use one bond for multiple branches or license types?
No. You typically need a separate bond for each license type (e.g., banker, broker, servicer). However, consult the Arkansas Securities Department for case-specific requirements.
What if my bond is rejected by NMLS?
If your bond is rejected, it’s usually due to incorrect information (e.g., bond amount, business name, NMLS ID). You must work with your surety to correct and re-submit the bond through the Electronic Surety Bond (ESB) system.
Does my personal credit affect bond approval?
Yes. Most surety companies evaluate your personal and business credit to determine eligibility and premium cost. Lower credit may result in higher premiums or denial of bonding.