Loan Originators are now required to be covered by a Surety Bond. If the Loan Originator is covered under the company's surety bond then no further coverage is required. However, if the Loan Originator is no longer employed by a company that has a surety bond and the Loan Originator wants to maintain an active license but is not actively employed as a Loan Originator, then the Loan Originator must obtain their own Surety Bond. The amount of the Surety Bond depends on the previous year's loan production, refer to the Order of the Commissioner below. If the event the Loan Originator does not have a Surety Bond in effect, then their license will be revoked.
Effective June 25, 2009 KRS 286.8-060 states the following: (1) Except as otherwise provided in this section, each mortgage loan company, mortgage loan broker, and mortgage loan originator shall post or be covered by a surety bond for the entire licensure or registration period in an amount prescribed by the executive director, but in no event shall the bond be less than two hundred fifty thousand dollars ($250,000) for mortgage loan companies and fifty thousand dollars ($50,000) for mortgage loan brokers.
(2) Every bond shall provide for suit thereon by any person who has a cause of action under this subtitle. The total liability of the surety, to all persons, cumulative or otherwise, shall not exceed the amount specified in the bond.
(3) The bond shall be in a form prescribed by the executive director and shall be made payable to the executive director. The terms of the bond shall provide that it may not be terminated without thirty (30) days prior written notice to the executive director.
(4) Every bond shall be available for the recovery of expenses, fines, restitution, and fees levied by the executive director under this subtitle, and for losses or damages that have been incurred by any borrower or consumer as a result of the registrant's or licensee's failure to comply with the requirements of this subtitle.
(5) Every bond shall provide that no suit shall be maintained to enforce any liability on the bond unless brought within three (3) years after the act upon which it is based.
(6) If the executive director or the executive director's representative shall at any time reasonably determine that the bond or securities aforesaid are insecure, deficient in amount, or exhausted in whole or part, he may by written order require the filing of a new or supplemental bond or the deposit of new or additional securities in order to secure compliance with this subtitle, the order to be complied with within thirty (30) days following service thereof upon the registrant or licensee.
On December 18, 2009 an Order of the Commissioner was issued amending the above statute to include the following language: KRS 286.8-060(1) is hereby modified as to require mortgage loan originators with an annual loan volume of less than ten million dollars ($10,000,000) to be covered by a surety bond of at least fifteen thousand dollars ($15,000). Mortgage loan originators with an annual loan volume of ten million dollars or greater shall be covered by a surety bond of at least twenty thousand dollars ($20,000).
Kentucky Association of Mortgage Professionals • P.O. Box 1641 • Owensboro, KY 42302 PH 270-929-2836 • FX 270-574-0005 • email@example.com