On September 12, 2016, the Nationwide Multistate Licensing System (“NMLS” or “the System”) will begin receiving and tracking Electronic Surety Bonds (“ESB”). In an unprecedented departure from the traditional uploading of a copy of a surety bond document to the applicant’s or licensee’s record followed by the delivery of the paper bond to the state, regulators in Idaho, Indiana, Iowa, Massachusetts, Texas, Vermont, Washington, and Wisconsin have publicly announced the adoption of ESB in 2016 for several license types.  This is the first group of states to “bond on line,” but all states are expected to have a common bond process through the NMLS.

Many states require licensed financial services businesses to get a surety bond so that state regulators or consumers may file claims against the bond to cover fines or penalties assessed, or provide restitution to consumers if the licensee fails to comply with licensing or regulatory requirements.  The NMLS reports that 177 license authorities currently managed on the system require a licensed company to maintain a surety bond as a condition of licensure.  States have even imposed bond requirements on individual mortgage loan originators (“MLOs”), in accordance with the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the “SAFE Act”), but allow for MLOs to be covered under a company bond.

NMLS was created to serve as a comprehensive system of record for licensing information. However, as it relates to surety bonds, the System’s current functionality is antiquated, limited, and does not allow for the tracking of bond requirements, or the maintenance of bond information validated by authorized surety companies and/or bond producers. State regulators have also cited the tracking of surety bond compliance as a reason for processing delays in license applications, amendment filings, and renewal approvals. For those reasons, the State Regulatory Registry LLC, which administers the NMLS, believed a fully electronic surety bond process would provide efficiencies for both industry and regulators.

The first phase of this ESB process entailed the creation of an account by each participating surety company and association with those accounts by surety bond producers. The second phase, which will begin September 2016, entails implementation of bond issuance, tracking, and maintenance.

If you have not already done so, and especially if you are licensed or intend to become licensed in one of the eight states listed above that will be implementing this new functionality in September, you should ensure that your surety bond company has created an account in the system and be aware of the new application and conversion deadlines that are listed on the NMLS ESB Adoption Map and Table.

NMLS is offering a complimentary training webinar on the upcoming ESB enhancements. The training is expected to provide an overview of the ESB enhancements, including the bond creation and management process, a demonstration of the new functionality, the resources available on the NMLS Resource Center, and a live question-and-answer opportunity.  Mayer Brown’s Regulatory Compliance Analysts have completed the training, and are available to assist our clients in this transition.

Friday, August 26, 2016

1:00 – 2:30 p.m. ET.

Click here to log in to the NMLS Learning Management System (“LMS”) and enroll in the webinar. NMLS intends to make a recording available within five business days of the webinar.

If you do not have an LMS account, click here for instructions on how to register.

*Mr. Prost is not admitted to practice law in the District of Columbia.

  • Crystal Ignatowski

    Wyoming has also announced adoption of NMLS ESB.

  • Right! Following the issuance of our post, above, the Wyoming Division of Banking announced that electronic surety bonds must be used by new applicants for Wyoming’s Exempt Company Registration, Money Transmitter License, Mortgage Broker License, and Mortgage Lender/Broker License starting September 9, 2016. More information on
    Wyoming and other state conversion deadlines is listed on the NMLS ESB Adoption Map and Table, available at http://mortgage.nationwidelicensingsystem.org/news/Documents/ESB%20Adoption%20Map%20and%20Table.pdf. Thanks for reading!