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| Pennsylvania – Mortgage Servicer ($500,000) Bond |  |
| Pennsylvania – Mortgage Broker Advanced Fees ($100,000) Bond | |
Introduction
In Pennsylvania, the mortgage sector is essential to helping people and companies fund real estate acquisitions around the state. Under the Mortgage Licensing Act (7 Pa. C.S. Chapter 61), which is overseen by the Pennsylvania Department of Banking and Securities (DoBS), all mortgage lenders, brokers, and servicers are required to hold the appropriate license in order to conduct business lawfully.
To ensure ethical lending practices and consumer protection, these licensees are required to obtain a Pennsylvania Mortgage Bond, which guarantees compliance with state laws, safeguards borrowers from financial misconduct, and reinforces trust and accountability within the state’s mortgage sector.
Explanation: Pennsylvania Mortgage Bond
A Pennsylvania Mortgage Bond is a surety bond required by the Pennsylvania Department of Banking and Securities (DoBS) for individuals and businesses engaged in mortgage lending, brokering, or servicing within the state. The bond guarantees that licensed mortgage professionals comply with the Pennsylvania Mortgage Licensing Act (7 Pa. C.S. § 6101 et seq.) and all associated regulations designed to protect consumers and ensure fair lending practices.
Purpose of the Pennsylvania Mortgage Bond
The primary purpose of this bond is to protect borrowers and the state from financial harm caused by unethical, fraudulent, or non-compliant actions by mortgage professionals.
If a licensed mortgage broker, lender, or servicer violates state law—such as by misrepresenting loan terms, mishandling funds, or failing to fulfill contractual obligations—affected parties can file a claim against the bond for reimbursement.
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Who Needs the Bond
A Mortgage Bond is required for all entities seeking or renewing the following licenses under the Pennsylvania Mortgage Licensing Act:
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Mortgage Lenders – entities that originate or fund mortgage loans;
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Mortgage Brokers – intermediaries arranging loans between borrowers and lenders;
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Mortgage Servicers – companies managing loan payments and escrow accounts;
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Mortgage Correspondents – entities funding or processing loans for lenders.
Each license type requires a bond to ensure regulatory compliance and consumer protection.
How the Bond Works
- The principal (licensee) obtains the bond from a licensed surety company.
- The obligee (Pennsylvania DoBS) requires the bond as a condition of licensing.
- If the licensee violates state laws—such as engaging in fraud, misappropriating funds, or breaching contracts—injured parties may file a claim.
- The surety pays valid claims up to the bond amount, and the licensee must reimburse the surety for any payout.
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Protection Provided by the Bond
The bond protects:
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Consumers from financial losses due to unethical lending or servicing practices.
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The State of Pennsylvania, ensuring mortgage professionals operate responsibly and in accordance with the law.
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The industry, by promoting integrity and accountability among licensed participants.
Process of Getting the Pennsylvania Mortgage Bond
Obtaining a Pennsylvania Mortgage Bond is a mandatory step for anyone seeking a mortgage lender, broker, servicer, or correspondent license under the Pennsylvania Department of Banking and Securities (DoBS). Below is the step-by-step process:
1. Determine Your License Type and Bond Requirement
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Identify whether you are applying as a mortgage lender, broker, servicer, or correspondent.
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Confirm the required bond amount.
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Verify requirements through the Pennsylvania Department of Banking and Securities or the Nationwide Multistate Licensing System (NMLS).
2. Choose a Licensed Surety Bond Company
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Select a surety company authorized to issue bonds in Pennsylvania.
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Ensure the surety is recognized by the NMLS and experienced in mortgage industry bonds.
3. Complete the Bond Application
Provide the surety with the following:
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Legal business name and address (matching NMLS records)
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Federal Employer Identification Number
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Owner and officer information
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Requested bond amount
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Financial statements or credit report
Applicants with strong credit typically receive faster approval and lower premium rates.
4. Undergo Credit and Financial Review
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The surety conducts a credit check and evaluates your company’s financial stability.
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If you have excellent credit, approval may be instant.
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Applicants with lower credit scores may need to provide additional financial documentation or pay a higher premium.
5. Receive a Bond Quote and Pay the Premium
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Once approved, the surety issues a bond premium quote based on credit and financial strength.
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Typical annual premium: % of the bond amount.
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Pay the premium to finalize issuance.
6. Bond Issuance and Filing
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The surety issues the official Mortgage Bond in your name.
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The bond must list:
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Principal: Your business (license applicant)
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Obligee: Commonwealth of Pennsylvania, Department of Banking and Securities
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Bond amount: As required by DoBS
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Submit the bond electronically through the NMLS or directly to the Department as part of your license application.
Conclusion
An important protection that encourages honesty and responsibility in the state’s mortgage sector is the Pennsylvania Mortgage Bond. It fosters public trust by guaranteeing adherence to the Pennsylvania Mortgage Licensing Act, safeguarding customers from financial loss, and allowing mortgage experts to operate legitimately and responsibly under state supervision.
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Frequently Asked Questions (FAQs)
How long is the bond valid?
The bond must remain active and continuous for the entire duration of the license. It is typically renewed annually alongside the mortgage license.
What happens if a claim is filed against the bond?
If a borrower or the state suffers financial harm due to the licensee’s noncompliance, they may file a claim against the bond. The surety company investigates and compensates valid claims up to the bond amount, after which the licensee must reimburse the surety.
Can the bond be canceled?
Yes, but the surety must provide written notice (usually 30 days) to the DoBS before cancellation. Licensees must replace or renew the bond immediately to avoid license suspension.
Can the same bond cover multiple business locations?
Generally, each licensed entity must maintain its own bond. However, some mortgage companies with multiple branches under one license may use a single bond if approved by the DoBS.
What happens if the bond lapses or is not renewed?
Failure to maintain an active bond can lead to license suspension, revocation, or denial of renewal by the Department until the bond is reinstated.