Montana Code 32-9-123. Surety bond requirement — notice of legal action
32-9-123. Surety bond requirement — notice of legal action. (1) (a) A mortgage loan originator must be covered by a surety bond in accordance with this section. If a mortgage loan originator is an employee of a licensed mortgage lender or mortgage broker, the surety bond of the licensed mortgage lender or mortgage broker may be used in lieu of a mortgage loan originator‘s surety bond.
Terms Used In Montana Code 32-9-123
- Borrower: means a person seeking a residential mortgage loan or an obligor on a residential mortgage loan. See Montana Code 32-9-103
- Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
- Department: means the department of administration provided for in 2-15-1001, acting through its division of banking and financial institutions. See Montana Code 32-9-103
- Entity: means a business organization, including a sole proprietorship. See Montana Code 32-9-103
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Mortgage: means a consensual interest in real property located in Montana, including improvements, securing a debt evidenced by a mortgage, trust indenture, deed of trust, or other lien on real property. See Montana Code 32-9-103
- Mortgage broker: means an entity that obtains, attempts to obtain, or assists in obtaining a mortgage loan for a borrower from a mortgage lender in return for consideration or in anticipation of consideration or holds itself out as being able to assist a person in obtaining a mortgage loan. See Montana Code 32-9-103
- Mortgage lender: means an entity that closes a residential mortgage loan, advances funds, offers to advance funds, commits to advancing funds for a mortgage loan applicant, or holds itself out as being able to perform any of those functions. See Montana Code 32-9-103
- Mortgage loan: A loan made by a lender to a borrower for the financing of real property. Source: OCC
- Mortgage loan originator: means an individual who for compensation or gain or in the expectation of compensation or gain:
(i)takes a residential mortgage loan application; or
(ii)offers or negotiates terms of a residential mortgage loan. See Montana Code 32-9-103
- Mortgage servicer: means an entity that:
(a)for forward mortgages:
(i)engages, for compensation or gain from another or on its own behalf, in the business of receiving any scheduled periodic payment from a borrower pursuant to the terms of a residential mortgage loan, residential mortgage servicing documents, or a residential mortgage servicing contract;
(ii)meets the definition of servicer in 12 U. See Montana Code 32-9-103
- NMLS: means a licensing system developed and maintained by the conference of state bank supervisors and the American association of residential mortgage regulators for the registration and licensing of persons providing nondepository financial services. See Montana Code 32-9-103
- Person: means an individual, sole proprietorship, corporation, company, limited liability company, partnership, limited liability partnership, trust, or association. See Montana Code 32-9-103
- State: when applied to the different parts of the United States, includes the District of Columbia and the territories. See Montana Code 1-1-201
(b)The bond must run to the state of Montana as obligee and must run first to the benefit of the borrower and then to the benefit of the state and any person who suffers loss by reason of the obligor’s or its loan originator’s violation of any provision of this part or rules adopted under this part. The department shall use the proceeds of the surety bonds to reimburse borrowers, the department, or bona fide third parties who successfully demonstrate a financial loss because of an act of a mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator that violates any provision of this part.
(2)(a) An entity licensed as a mortgage broker, mortgage lender, and mortgage servicer is required to maintain one surety bond for each entity license.
(b)The amount of the required surety bond must be calculated by combining the annual loan production amounts for all persons originating residential mortgage loans and for all business locations of the mortgage broker or mortgage lender and must be in the following amount:
(i)$25,000 for a combined annual loan production that does not exceed $50 million a year;
(ii)$50,000 for annual loan production of more than $50 million but not exceeding $100 million a year; or
(iii)$100,000 for annual loan production of more than $100 million a year.
(c)The amount of the required surety bond for a mortgage servicer must be calculated on the mortgage servicer’s total unpaid principal balance of residential mortgage loans as of December 31. The amount of the surety bond must be in the following amount:
(i)$75,000 for an unpaid principal balance that does not exceed $25 million a year;
(ii)$150,000 for an unpaid principal balance of more than $25 million but not exceeding $100 million a year;
(iii)$250,000 for an unpaid principal balance of more than $100 million but not exceeding $500 million a year; or
(iv)$350,000 for an unpaid principal balance of more than $500 million a year.
(3)A mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator shall give notice to the department through the NMLS within 15 days of the mortgage broker, mortgage lender, mortgage servicer, or mortgage loan originator obtaining knowledge of the initiation of an investigation or the entry of a judgment in a criminal or civil action. The notice must be given if the investigation or the legal action is in any state and involves a mortgage broker, a mortgage lender, a mortgage servicer, a mortgage loan originator, or anyone having an ownership interest in a mortgage broker entity, mortgage lender entity, or mortgage servicer entity. In the case of a legal action, the notice must include a copy of the criminal or civil judgment.
(4)(a) An obligor shall give written notice to the department through the NMLS of any action that may be brought against it by any creditor or borrower when the action:
(i)is brought under this part;
(ii)involves a claim against the bond filed with the department for the purposes of compliance with this section; or
(iii)involves a claim for damages in excess of $20,000 for a mortgage broker or mortgage loan originator or $200,000 for a mortgage lender or mortgage servicer.
(b)An obligor shall give written notice to the department through the NMLS of any judgment that may be entered against it by any creditor or any borrower or prospective borrower.
(c)The written notice must provide details sufficient to identify the action or judgment and must be submitted within 30 days after the commencement of any action or within 30 days after the entry of any judgment.
(5)A corporate surety shall, within 10 days after it pays any claim or judgment to any claimant, give written notice to the department of the payment with details sufficient to identify the claimant and the claim or judgment paid. Whenever the principal sum of a required bond is reduced by one or more recoveries or payments on the bond, the obligor shall furnish a new or additional bond so that the total or aggregate principal sum of the bond or bonds equals the sum required under this section or the obligor shall furnish an endorsement duly executed by the corporate surety reinstating the bond to the required principal sum.
(6)A bond filed with the department or with the NMLS for the purpose of compliance with this section may not be canceled by the obligor or the corporate surety except upon written notice to the department through the NMLS. The cancellation may not take effect until 30 days after receipt by the department of the notice. The cancellation is effective only with respect to any occurrence after the effective date of the cancellation. (See part compiler’s comment regarding contingent suspension.)