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 ESB for Licensees 

 Background

Many state laws and regulations require financial services licensees to obtain a surety bond as a condition of licensure. State regulators or consumers can file claims against a surety bond to cover fines or penalties assessed or provide restitution to consumers due to failure or a licensee to comply with licensing or regulatory requirements.

In addition, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) requires applicants to meet "...either a net worth or surety bond requirement..." Currently, 48 state agencies require mortgage loan originators (MLOs) to either have their own surety bond or be covered under a company's surety bond in order to originate mortgages. 177 license authorities managed on NMLS require the company to obtain and maintain a surety bond as a condition of licensure.

Previously, NMLS functionality had been limited to the uploading of a surety bond document. The current hard copy requirement is outdated and will be transformed to a fully electronic process that will provide efficiencies for industry and certainty for regulators starting with the System update in September 2016.

 NMLS Electronic Surety Bond Training

See the Training Workshops page for a listing of upcoming live trainings, as well as a list of recorded webinars.

NMLS Electronic Surety Bond Training

Click the link above to access a self-paced online course that provides training and resources for Surety Companies, Surety Bond Producers, and NMLS Licensees. Topics include:

  • NMLS Resource Center Information
  • Creating and Managing Your NMLS Account
  • Creating and Managing Associations
  • Creating and Managing Electronic Surety Bonds

 What do I need to get started?

Step 1: Consult ESB license requirements to identify the participating state agencies, license types, and any applicable deadlines

Step 2: Grant Authority to your surety bond issuer in NMLS

  • Log in to NMLS and navigate to the Tasks tab.
  • Click on Surety Bonds to access the new surety bond functionality.
  • Click on Surety Entity Access to search for your surety bond producer and surety company.

    Best Practice: Licensees are recommended to search for their surety bond producer by the NPN and surety company by their NAIC, as applicable, to reduce search results.

Step 3: Surety Company/Surety Bond Producer initiates bond issuance process

  • Once authority is granted, the surety is able to create a new bond or bond conversion on your behalf in NMLS.
  • For an overview of this process, please reference the Bond Creation workflow.

Step 4: Bond Execution

  • Depending on the license type, bond execution may require a control person to be designated as the signatory or may permit a company account user (AA or OU with the Surety Bond Management role) to sign the bond.
  • For an overview of this process, please reference the Bond Execution workflow.
  • For existing licensees, electronic bond conversions will be sent directly to your regulator once the bond had been Marked Ready by the company.
  • For new applicants in the process of completing their Company Form (MU1), once the electronic bond has been Marked Ready it will not be sent to your regulator until the submission of the Company Form (MU1) occurs.

 Commonly Asked Questions

Q:  The process of initiating a new bond, include providing details such as bond amount, license type and jurisdiction, to a surety bond producer or surety company is completed outside of NMLS, correct? Is this also true of bond riders? 

A:  Yes, the initial process of providing bond specific information from the licensee to the surety entity, and the process regarding changes to existing electronic bonds, must be completed outside of NMLS. Once the terms are confirmed (and the licensee has granted authority) the surety entity can create the bond/bond rider in NMLS for electronic submission.

Q:  Will licensees need to make any changes to bond documentation that were uploaded in NMLS previously?

A:  No changes should be made to any previously uploaded documentation related to surety bonds in NMLS.

Q:  Are there any fees in NMLS related to submitting bonds electronically?

A:  No, there are no fees associated to submitting bonds electronically in NMLS at this time.

Q:  Is there a list of surety companies and surety bond producers that are available in NMLS?

A:  Yes, a list has been posted to the Surety Industry NMLS Resource Center page.

Q:  How will our current bonds be put into the system?

A:  The paper bonds that currently exist will be replaced by “converted bonds.” What this means is that the surety entity will be responsible for creating an electronic instances in NMLS of the current bond and will mark the bond as converted. This will inform the regulator that an electronic bond will be replacing the existing paper bond. You will sign it electronically and mark it ready for regulator at the time of submission. No action should be taken regarding the paper versions that have been upload via the Company Form (MU1).

For a full list of commonly asked questions, please see the FAQs.

 
 

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