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WBK Industry News - State Regulatory Developments

States to Begin Transition to Electronic Surety Bonds in Mid-September 2016

The future of surety bonds has arrived to the Nationwide Multistate Licensing System (“NMLS”). Beginning mid-September 2016, several states will begin replacing paper surety bonds with electronic surety bonds (“ESBs”). Licensees with licenses affected by the transition need to be sure that their surety companies and surety producers have established accounts in the NMLS. In addition, licensees need to grant access to their surety companies and surety producers in order for the ESB to be completed through the NMLS. Information regarding signing up for accounts can be viewed at the following website: http://mortgage.nationwidelicensingsystem.org/Pages/esbt.aspx.

Licenses That Will be Transitioning

Below is a summary of requirements for each of the initial state agencies and license types that will be transitioning to the ESB starting September 2016.

Idaho Department of Finance

  • Collection Agency License

Idaho Collection Agency Licensees have from September 13, 2016 until March 15, 2017 to complete the transition. The regulator has modified the bond form to include language for electronic delivery of cancellation notices and inclusive language for trade names. The processing of the ESB will not affect licensees renewing these licenses.

Indiana Department of Financial Institutions

  • Debt Management License
  • Exempt Company Registration
  • First Lien Mortgage Lending License
  • Money Transmitter License
  • Subordinate Lien Mortgage License

These Indiana Licensees have from September 12, 2016 until December 31, 2016 to complete the transition. The regulator has modified the bond form to replace the city, county and state with the NMLS Unique Identification Number, include all properly registered trade names, and remove the corporate seal and power of attorney requirements. Note that all bonds must be transitioned in order to renew these licenses.

Iowa Division of Banking

  • Closing Agent License
  • Debt Management License
  • Exempt Company Registration
  • Money Services License
  • Mortgage Banker License
  • Mortgage Broker License

These Iowa Licensees have from September 12, 2016 until December 31, 2016 to complete the transition. The regulator has modified the bond form to remove the city, state, and zip code of the principal and surety, and to remove the corporate seal and power of attorney requirements. Note that all bonds must be transitioned in order to renew these licenses.

Massachusetts Division of Banks

  • Check Seller License
  • Debt Collector License
  • Foreign Transmittal Agency License
  • Mortgage Broker License
  • Mortgage Lender License
  • Exempt Company Registration

These Massachusetts Licensees have from September 12, 2016 until December 31, 2016 to complete the transition. The regulator has modified the bond form to remove trade names, the corporate address, the surety’s address, and the notarization requirement. The bond has been revised to add the Surety’s NAIC number. Note that all bonds must be transitioned in order to renew these licenses.

Texas Department of Banking

  • Money Transmitter License

The transition period for Texas Money Transmitter Licensees begins September 12, 2016.  Additional requirements have not yet been provided but will be available on the NMLS website shortly.

Vermont Department of Financial Regulation

  • Debt Adjuster License
  • Money Transmitter License
  • Lender License
  • Litigation Funding Registration
  • Loan Servicer License
  • Mortgage Broker License

Vermont Licensees that hold a Lender License, Litigation Funding Registration, Loan Servicer License and/or a Mortgage Broker License have from September 12, 2016 until June 30, 2017 to complete the transition. Licensees that hold a Debt Adjuster License and/or a Money Transmitter License have until November 1, 2016 to transition to the ESB. The regulator has modified the bond form to remove trade names, the corporate address, the surety’s state of organization and principal address. The bond has been revised to add an effective date. Licenses where bonds need to be transitioned by November 1, 2016 will not be able to renew those licenses until those bonds are transitioned.  Licenses where bonds do not need to be transitioned until June 30, 2017 are not affected by renewals.

Washington Department of Financial Institutions

  • Mortgage Broker License

The transition period for Washington Mortgage Broker Licensees begins September 12, 2016.  Additional requirements have not yet been provided but will be available on the NMLS website shortly

Wisconsin Department of Financial Institutions

  • Mortgage Banker License
  • Mortgage Broker License

These Wisconsin Licensees have from September 12, 2016 until September 1, 2017 to complete the transition. The regulator has modified the bond form to remove language indicating a bond cancellation must be received via certified mail. The processing of the ESB will not affect licensees renewing these licenses.

Wyoming Division of Banking

  • Mortgage Exempt Company Registration
  • Money Transmitter License
  • Mortgage Broker License
  • Mortgage Lender/Broker License

These Wyoming Licensees have from September 12, 2016 until June 30, 2017 to complete the transition. The regulator has modified the bond form to include a licensee’s NMLS ID number and to remove the requirement for trade names. The processing of the ESB will not affect licensees renewing these licenses.

All ESBs can be cancelled through the NMLS and the states will no longer require a continuation certificate for annual renewals.

Transition Procedures

As noted above, each surety company and surety producer company needs to be registered with the NMLS. Each licensee will then need to grant access to their surety company and surety producer. The licensee then needs to contact their surety producer and the surety producer will prepare the bond. The licensee should review the bond to ensure that bond has the same bond number as the original bond and that the bond amount and all other information is accurate. Once the bond is complete, an MU2 disclosed officer of the licensee must attest to and submit the bond.

Licensees can find additional resources on the NMLS website at http://mortgage.nationwidelicensingsystem.org/Pages/esbt.aspx.

Quick guides regarding ESBs are also available at http://mortgage.nationwidelicensingsystem.org/slr/resources/Pages/CompanyQuickGuides.aspx.

Training is also available through the CSBS Learning Management System.  Licensees can visit the website at https://www.csbstraining.org/lms/index.php?r=site/index to register for the ESB Training Webinar.