Close this F.A.Q. page.

Illinois Surety Bond Frequently Asked Questions (FAQs) &
 Illinois Department of Financial & Professional Regulation
 Division of Banking (DOB) Answers
(November-December, 2010)

 

View all answers
 
 
Q. When is the new surety bond requirement effective?
A.

The surety bond requirements in 38 Ill. Adm. Code 1050.490 have been amended effective October 29, 2010 and apply to Illinois Residential Mortgage Licenses issued for the period January 1, 2011 to December 31, 2011.  The new surety bond requirements may be viewed at: http://www.obre.state.il.us/resfin/Forms/ILSuretyBondRequirements.pdf

Illinois Company Bond Form   Click to Download Here
Illinois Exempt Company Bond Form   Click to Download Here

Q. Why was this change made?
A.

In compliance with the federal SAFE Act and the Residential Mortgage License Act of 1987 (RMLA) as amended by P.A. 96-0112, surety bonds are changed to include increased, tiered amounts and expanded to cover mortgage loan originator activities.  To update and maintain uniform coverage amounts and terms, these changes apply to all Illinois Residential Mortgage Licensees for all of their Illinois loan activities.

Q. My Company has a current surety bond. How will this change affect my company’s 2011 License Renewal Application?
A.

The renewal cycle in the Nationwide Mortgage Licensing System (NMLS) opened on November 1, 2010 and will close December 31, 2010.  For licensees who already have or are planning to submit their renewal applications with a surety bond secured under the pre-October 29, 2010 wording of 38 Ill. Adm. Code 1050.490, the license may be conditionally renewed subject to the submission of a new surety bond that currently complies with 38 Ill. Adm. Code 1050.490.  The condition must be met and new surety bond obtained for the term of the renewed license no later than February 28, 2011.  New surety bonds should be applied for immediately with your provider to avoid any problems with new bond coverage commencing with the renewed license on January 1, 2011.  Any companies issued conditional licenses which fail to comply with this February 28, 2011 deadline will have their licenses inactivated for failure to meet a condition of licensure.  As a result, a new license application must then be submitted to the NMLS and approved by the DOB to conduct licensable activities.

Q. I have applied or intend to apply for a new Illinois residential mortgage license. How do the changes affect my new license application process?
A.

Applicants will be required to submit proof of the 38 Ill. Adm. Code 1050.490 compliant surety bond prior to being issued their Illinois residential mortgage license.  Every new licensee will be required to have the minimum amount of $25,000 of surety bond coverage, but those anticipating Illinois loan volumes over $5,000,000 should submit appropriate surety bonds exceeding this minimum amount.  The DOB will review a licensee that has not reached its first annual activity report filing date for its volume of Illinois loan activity and communicate any determinations of appropriate bond coverage amounts to licensees.

Q. What are the new surety bond amounts and how are they determined?
A.

The prior $20,000 flat rate surety bond is eliminated and new surety bond amounts are implemented ranging from $25,000 to $150,000 depending upon the licensee’s volume of Illinois loan activity.  The new surety bond amount corresponds to Illinois loan activity volumes submitted by each licensee to the DOB by March 1 each year with that licensee’s annual report of mortgage activity, brokerage activity, and/or servicing activity for the prior calendar year.  For current transitioning of surety bonds, licensees should refer to their reports filed with the DOB by March 1, 2010 for calendar year 2009 activities.  On an annual basis, the DOB shall review licensees’ prior calendar year activity reports to determine compliance for correct surety bond coverage.

Q. I am a mortgage broker. Are my surety bond amounts based upon loan applications taken or for closed loans only?
A.

Surety bond amounts are based upon the volume of Illinois loan applications taken because examinations and disciplinary fines can touch upon company and mortgage loan originator activities in connection with any loan file, and not just with the closed loan files.

Q. Can my company continue my pre-October 29, 2010 compliant surety bond by submitting a rider or continuation certificate in the increased amount?
A.

No, a rider is not acceptable.  The DOB has a new model surety bond form (IL 581-0102) which allows for all changes in 38 Ill. Adm. Code 1050.490, including coverage for mortgage loan originator activities and a period concurrent with the new calendar year term of the license.  Although a rider is not acceptable, the DOB will accept a re-write of a prior surety bond using the new form so that the existing surety bond number may be maintained.

Illinois Company Bond Form   Click to Download Here
Illinois Exempt Company Bond Form   Click to Download Here

Q. I am a Mortgage Loan Originator. Do I need to submit my own surety bond?
A.

No, your employing company’s surety bond covers all mortgage loan originator activities under your individual license.  Mortgage loan originators remain responsible for payment of all fines issued by the DOB against their own license and non-payment may result in further discipline; however, the DOB will now additionally be able to make claims against your employing company’s bond for such past due fine payments.

Q. Will this affect my Fidelity Bond requirements?
A.

No, the changes only affect surety bond requirements.