MONTANA Department of Administration Mortgage Lender Bond
PROPOSED: 05/08/2008
ADOPTED: 07/21/2008
EFFECTIVE: 08/01/2008
The Montana Department of Administration (Department) adopted new rules to implement HB 69 (2007), which requires residential mortgage lenders to post a license bond. The law provides that the amount of the bond is to be set by regulations. The Department's rules require a bond in the amount of $50,000 for the lender's principal office and an additional $5,000 for each branch office. The rule requires the bond to remain in place for five years for the filing of claims for acts that occurred during the bond period, which is concurrent with the period of licensure. SFAA submitted comments concerning the five-year tail, which we summarized in our previous reporting on this regulation. Of note, SFAA told the Division that longer projections into the future for the financial strength of the lender would result in less certainty in underwriting the bond and increased risk. We requested reconsideration in implementing a five-year tail, noting that bond forms typically provide a one-year tail during which claimants may make a claim for acts occurring during the bond term. The law does not provide for a five-year tail. The Department declined to accept our comments and as adopted, the rules now specify that claims may be made on the bond during the license period and for five years after the license expires.
Under the law, the bond serves to secure the recovery of expenses, fines, and fees levied by the Department for losses or damages incurred by borrowers or consumers as the result of a licensee's noncompliance with the law. The bond must be payable to the Department and issued by an insurance company licensed in the State under the law. If either the surety or the licensee cancelled the bond, the licensee is responsible for informing the Department in writing by certified mail, and must provide a new surety bond. The law also provides that the surety bond only may be cancelled with at least 30 days notice. The license will be suspended automatically if the licensee did not supply a new surety bond acceptable to the Department by the date of the cancellation. The rule implements these provisions.
State Contact:
Kelly O'Sullivan, Legal Counsel, Division of Banking and Financial Institutions, PO Box 200546, Helena, MT 59620-0546, 406-841-2930, kosullivan@mt.gov
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