One of the primary reasons why a surety bond is required of mortgage brokers is for client protection. If the licensed mortgage broker suddenly defaults on the obligations required, the mortgage broker’s clients will be justly compensated via claims made on the surety bond.
Recently, House Bill 1801 has made important changes to the Arkansas Fair Mortgage Lending Act regarding how claims are made.
Before the enactment of House Bill 1801, now Act 669 of 2017, the number of years that a client can file a claim on the surety bond after the mortgage broker has ceased its operation within Arkansas is not specified.
The provision only states that “a party having a claim against the licensee may bring suit directly on the surety bond, or the commissioner may bring suit on behalf of any claimants, either in one action or successive actions.”
Starting March 27, 2017, the mortgage broker surety bond claims have been time-barred. The client who has suffered damages due to the licensed mortgage broker’s fraudulent acts can file for claims up to five years from the time the licensed mortgage broker has stopped doing business within the state.
Depending on the case, the Arkansas Securities Commissioner might extend the time in which the client can file a claim.
Other Changes to the Fair Mortgage Lending Act
The number of years that a client can file a claim on the mortgage broker surety bond is not the only section of Arkansas Fair Mortgage Lending Act that has been amended. Some of the other changes are as follows:
- As part of the licensure requirement, the submission of qualifications, business history, and financial condition will be reserved for the applicant only.
- The license applicant is now required to submit a set of fingerprints to the Federal Bureau of Investigation or other governmental agencies that are authorized to receive fingerprints for Arkansas
- The Arkansas Securities Commissioner will no longer prescribe the amount of the surety bond. Instead, the bond amount will be based on the loan activity from the previous year. However, it shouldn’t be less than $100,000.
- The surety bond can now be written in a form that is satisfactory to, instead of prescribed by, the Arkansas Securities Commissioner.
Do you have questions about this surety bond or any other surety bond for that matter? Talk to one of our expert surety bond agents! Call us at 800-333-7800!