Kansas Supervised Lender Bond

What is a supervised lender surety bond?

Supervised lenders in certain parts of the country are required to post a bond as part of their industry's licensing process. States with this requirement include Colorado, Maine, Kansas, and Oklahoma.

Other states may require a single form of lender license or require several specific licenses for mortgage and other types of lenders.

It's important to note that surety bonds do not function as insurance. While an insurance policy helps to protect you and your business, a bond helps to protect consumers and the state or other governing authority.

What is a supervised lender?

Any lender that is subject to scheduled examinations by a federal authority is defined as a supervised lender. 

In most cases, when a lender is referred to as "supervised" or "unsupervised," it's in reference to mortgage lending organizations.

Supervised lenders are typically part of a bank, credit union, or insurance company. These organizations regularly fall under the supervision of the FDIC, Federal Housing Administration, National Credit Union Administration, or other similar agency.

Generally, supervised lenders are more closely monitored than their unsupervised counterparts, are held to higher standards, and, as a result, are viewed by some consumers as more trustworthy.

How much does a supervised lender bond cost?

Prices for supervised lender bonds will vary from state to state. The three most important cost factors include:

• The bond amount required by your state
• The size of your organization 
• Your credit rating 

Each state has different bond requirements, and the amount you need to post can be as low as $5,000 in Oklahoma to as much as $300,000 in Kansas.

Another factor, which is the case in Kansas, is the number of branch locations your company maintains. Some states will require a bond for each additional location, and this bond amount will vary for each state.

Your annual premium as a supervised lender will vary based on your credit score, with rates ranging anywhere from 1% to 15% of the total bond value.

NNA Surety Bonds currently offers policies for supervised lenders in Colorado, Oklahoma, Maine, and Kansas.

How does this bond work?

A supervised lender bond works just like most other types of surety bonds. The policy acts as a legal contract protecting the state and the consumer. 

If a lender violates a state or federal regulation, a claim can be made against their bond. In this event, up to the full value of the bond may be used to reimburse losses suffered by a consumer or to pay any related fines and fees owed to the appropriate authority.

If a claim is made and upheld in court, you, the policyholder, will be required to repay the surety company backing your bond. Upheld claims can also make it difficult to obtain future bonds, in turn jeopardizing your lender’s license.

Why do lenders need to be bonded?

In short, supervised lenders must have a proper surety bond policy in order to get their business license.

Professionals in this industry are placed under more scrutiny by regulating authorities. As a result, laws may be more stringent and complex. By requiring a surety bond, lenders are encouraged to act in compliance with these laws and in the best interests of the consumer.

What else should I know about this bond?

Various federal and state-level lending, credit, and banking authorities will have different requirements and definitions for lenders. 

For example, some states make a distinction between mortgage lenders and supervised lenders and have specific license requirements for both. Other states do not make this distinction.

As mentioned above, some states will require a bond for the primary location of your lending company, plus further bonds for each branch location.

If you are unsure of your state’s licensing and bond requirements, NNA Surety Bonds can help.