You might be paying too much for your license bonds if you are paying a premium of more than $5 per thousand (or 0.50 percent) of the bond amount. However, the premium you pay is certainly dependent on various underwriting factors: 1. Do you have decent credit? Not great. Just decent. You probably do or you wouldn’t be licensed. 2. Do you have any skeletons in your past? Bankruptcies, felonies, prior bond claims, etc. You probably don’t or you wouldn’t be licensed.
But how much bonding do you really need? There is a level of bonding that is based primarily on underwriting the an owner personally. Above that level, business and personal financial statements are considered as the primary focus of the underwriting.
Meanwhile, some bond carriers are simply better than others at this particular line of business. Some carriers view mortgage bonds as more risky than other types of bonds so their pricing and underwriting process is very relative to that perception of risk. It may not be for you.
Similarly, the broker you use is your path to the surety market. Use their knowledge of and access to bond carriers because that has a direct relationship with what the price and process is for your bond.
However, it should be noted that the variable that obviously has the biggest impact on your bond pricing is your broker. That’s your access to the market.
Remember that the mortgage bond market has changed significantly over the past few years. Carriers began becoming increasingly nervous about what would happen when the industry bubble eventually popped. Some proactively began to increase prices, tighten underwriting, raise qualifications and limit exposures. Once the bubble burst, others reactively did the same and some even stopped writing mortgage bonds entirely.
A few years ago, the average surety pricing was at a widely-available rate of $7.50 per thousand. However, it quickly moved up to $10 per thousand after the big pop. A few carriers positioned themselves at even higher rates in order to absorb the flurry of claims and uncertainty brought on by the industry’s implosion and increased regulation. Those carriers that had been writing mortgage bonds for years and had large exposures were suddenly faced with game-changing events and conditions that forced them to endure financial losses and realign their perspective of risk. It is worth it to find the right one for you.