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Pennsylvania Mortgage Servicers Now Required to Get Licensed and Bonded

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As of June 2018, Pennsylvania non-bank mortgage loan servicers have to get licensed in order to operate in the state. The changes are introduced by Senate Bill 751, which makes alterations to the Pennsylvania Mortgage Licensing Act (MLA) The bill sets licensing requirements for mortgage servicers, such as meeting surety bond requirements, as well as posting a fidelity bond. Licensees will also need to meet fixed level of net worth criteria. The changes with the new bill In most states across the country, mortgage servicers have to obtain a license prior to conducting their activities. With Senate Bill 751, Pennsylvania becomes the next state that introduces a regulatory procedure for this type of mortgage professionals. In this way, it aims to guarantee better compliance of mortgage servicers with federal and state laws. By amending the state’s Mortgage Licensing Act, legislators aim to bring legal clarity and ensure higher safety standards for the general public. The new legislation comes as a legal answer to cases of consumer complaints from servicers in Pennsylvania. For offences committed by servicers, the current MLA fines of $10,000 per occurrence apply as well. Servicers’ licenses can also be revoked and suspended, if deemed necessary. Besides the licensing criteria, the new bill also introduces important definitions of key terms and sets disclosure rules. It creates a wholesome legal framework for mortgage servicers in Pennsylvania. The licensing requirement for PA mortgage servicers With the introduction of the bill, the Department of Banking and Securities becomes the regulatory body that oversees non-bank mortgage loan servicers in the state. It takes over the responsibility to ensure that mortgage servicers comply with the Consumer Financial Protection Bureau’s regulations at 12 CFR, Pt. 1024. License applicants will have to submit their documents through the Nationwide Multistate Licensing System (NMLS), similarly to most other mortgage professionals in the U.S. You will be able to file your application starting April 1, 2018. The licensing process for non-bank mortgage servicers will entail obtaining a $500,000 surety bond. You will also need to get a fidelity bond in a sufficient amount set by the authorities, and the bond should be approved by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation. Mortgage servicers will also need to maintain a minimum of $250,000 net worth at all times during the licensing period. You will have to cover licensing fees as well. Initial licenses cost $2,500 for the first office and $1,250 for each additional branch. For renewals, the fees are $1,000 for the principal office and $500 for additional ones. Meeting the bonding criteria One of the major licensing requirements you have to comply with if you want to run a mortgage servicing business in Pennsylvania is to obtain a $500,000 surety bond. The bonding functions as an extra layer of security for the state and consumers. For example, if a customer is subjected to any damages as a result of your actions as a mortgage servicer, they can file a claim against you. On proven claims, affected parties can receive a compensation that is up to the bond amount you have posted. In the case of Pennsylvania mortgage servicer bonds, this is $500,000. In order to get bonded, you don’t need to cover the whole required amount. You only have to pay a small percentage of it, which is often between 1% and 5%. This is called the bond premium and is determined on the basis of your personal and business finances. The better your overall profile is, the lower your bond cost is likely to be. https://nationalmortgageprofessional.com/news/66526/pennsylvania-mortgage-servicers-required-licensed-bonded

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legislation

Canada: Obligation To Disclose A Surety Bond To Potential Beneficiaries

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Is the Decision in Valard Construction Ltd v. Bird Construction Co.1 Really Revolutionary in Quebec? The Supreme Court of Canada recently ruled on the obligation, whose existence and degree of intensity vary according to the circumstances, to disclose the existence of a surety bond for construction wages and materials to potential beneficiaries, pursuant to general principles of Common Law trusts and equity that do not apply, or at least not in the same way, in Quebec. After analyzing the decision, we will review the state of the law in Quebec in this regard. 1. The Valard decision General contractor Bird Construction Co. (“Bird”) required its sub-contractor Langford Electric (“Langford”) to provide a CCDC-222-type surety bond for the payment of wages and materials of its sub-contractors and suppliers, including Valard Construction Ltd. (“Valard”), in connection with a private construction project in the Alberta oilsands The provisions of the bond created a Common Law trust and named Bird as the trustee of the trust, which was intended to provide protection to unpaid creditors of Langford, who had to give the trustee notice of their claim within 120 days of their last provision of work or materials2. When Valard learned of the existence of the surety bond, however, the 120-day notice period had expired, such that its claim was rejected by the surety, Guarantee Company of North America. Following this rejection, Valard sued Bird on the grounds that it had breached its duty to inform Valard of the existence of the bond. Both the trial judge and the Alberta Court of Appeal dismissed Valard’s action. The Supreme Court overturned those judgments, concluding that even if the contract3 and Alberta law did not expressly require the trustee to inform potential beneficiaries of the bond, certain circumstances could require it to “take reasonable steps to notify potential beneficiaries of the trust”. In this case those circumstances were that the surety bond in question was not commonly used in private-sector projects in the oilsands, that it was not advertized or posted in the on-site trailer where Valard was required to attend daily meetings, that Bird had been advised that Valard was experiencing difficulties in getting paid, and that Valard was unaware of the bond’s existence until its right to avail itself thereof had expired. The Court indicated that in other circumstances, such as where a surety bond is commonly used or expressly referred to in the contract documents, “few if any steps may be required by a trustee” to disclose the bond’s existence. The Supreme Court analyzed the degree of intensity of the trustee’s duty in situations where a beneficiary arguably should be informed of the existence of the surety but neither the law nor the terms of the bond require this. Read More … http://www.mondaq.com/canada/x/684844/Building+Construction/Obligation+to+Disclose+a+Surety+Bond+to+Potential+Beneficiaries

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Are agents really that satisfied with their P&C carrier partners?

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2018 Agent Study reveals the level of satisfaction with insurers, and how producers perceive the quality of commercial carriers. In 2017, NU forged an alliance with the National Association of Professional Insurance Agents (PIA) and Flaspöhler | NMG to conduct the inaugural Independent Agent Study — a research project designed to annually take the pulse of independent Property & Casualty insurance agents throughout the U.S. and provide revealing insight into the demographics, books of business and challenges they face, and reveal their most highly rated carrier partners. Today, we look at the findings around how respondents rate their level of satisfaction with their commercial P&C carrier partners, and the various criteria by which producers perceive the quality of those commercial carriers. When asked what indications of quality they value most in a commercial P&C carrier, 64.3% of our study respondents said “ease of doing business,” which was the No. 1 response. That was followed by “fair, timely claims handling” (46.1%) and “strong, knowledgeable underwriting” (38.7%) “superior customer service” (37.4%) and “consistent underwriting” (36.5%). What do those numbers reveal? That independent agents want to serve their clients quickly, effectively and with minimum agony. Carriers would do well to consider in their own workflows what can be done to better facilitate meeting those goals. When asked to rate their overall level of satisfaction with the commercial carriers they use, 36.8% of respondents said they were “very satisfied” while 52.5% said they were “somewhat satisfied.” While only a small percentage openly said they were unsatisfied, that “somewhat satisfied” segment warrants further listening by carriers. Food for thought: What can be done on both sides to improve those relationships? Flaspöhler has long conducted its own larger annual study of agents (the Flaspöhler | NMG Producer Study) on behalf of key P&C carriers, which use the results to help them best meet agent needs. The data included in the study featured in NU and on PropertyCasualty360.com this month are extracted from Flaspöhler’s larger research study (upward of 300 pages), which the firm makes available to rated P&C commercial lines carriers. (Contact [email protected] for more information.) https://www.propertycasualty360.com/2018/03/12/are-agents-really-that-satisfied-with-their-pc-car

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legislation

Supreme Court of Canada Provides Guidance on Trustees’ Duty to Disclose Construction Bonds to Beneficiaries

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The Supreme Court of Canada (SCC) ruled in its recent decision, Valard Construction Ltd. v. Bird Construction Co. (Valard Construction), that an “obligee” or trustee under a labour and material payment bond (usually the owner or general contractor) may be required to disclose the bond’s existence to its beneficiaries (usually subcontractors). Prior to this decision, Canadian courts held that an obligee is only required to disclose the existence of a bond in response to a demand for information, such as demands made under applicable builders’ lien legislation. From now on, owners and general contractors will need to notify potential claimants of the existence of a bond in certain circumstances. OVERVIEW Valard Construction arose out of a claim by a utility sub-subcontractor (Valard) for directional drilling work done and materials provided to an oil sands worksite located near Fort McMurray, Alberta. The electrical subcontractor that engaged Valard became insolvent and some of Valard’s invoices went unpaid. Valard later learned of a bond obtained by the electrical subcontractor, which named the general contractor as obligee and the electrical subcontractor as principal, and sought to claim under the bond. The bond at issue was a standard form CCDC 222-2002 labour and material payment bond, which provides that a beneficiary who has not received payment within 90 days of the last day on which it provided work and/or materials may sue the surety on the bond for the unpaid sum. The beneficiary is required to provide notice to the surety, principal and obligee of its claim within 120 days of the last date that the work and/or materials were provided to the project in order to claim under the bond. Valard did not learn of the bond until seven months after the 120-day notice period had expired. As a result, the surety denied Valard’s claim. Valard then commenced a claim against the general contractor for the amount it would have claimed under the bond. SCC Decision The majority of the SCC found that the general contractor was liable to Valard for the sum that it could have obtained under the terms of the bond, had it been aware of its rights. According to the SCC, obligees are required to inform potential beneficiaries of the existence of a bond where the beneficiary would, objectively, suffer an unreasonable disadvantage by not being informed of the bond. Whether a beneficiary would suffer an unreasonable disadvantage is determined based on the circumstances in which the bond was entered into, including its terms, the nature of the industry and the beneficiary’s entitlement under the bond. In Valard Construction, the majority of the SCC held that the general contractor was required to inform Valard of the bond’s existence because labour and material payment bonds are unusual in private oil sands projects, Valard was unaware of the existence of the bond, and its entitlement was time-limited, such that it was unable to claim on the bond due to the expiry of the notice period before it learned of the bond. IMPLICATIONS Owners and General Contractors (Obligees) For obligees, Valard Construction creates a new administrative burden and legal risk. The test of whether a beneficiary would “suffer unreasonable disadvantage” due to lack of notice of the bond is unclear. Barring long-standing and well-known requirements for bonds on the type of construction at issue, it appears likely that notice of a bond will be required, or at least prudent. The next question is “what is sufficient notice?”. The SCC noted that the general contractor could have satisfied its duty by simply posting a notice of the bond at its on-site trailer where workers were required to attend site meetings on a regular basis. This would have ensured that a “significant portion” of the potential beneficiaries would have had notice of the bond. This seems simple enough, but it is not hard to imagine scenarios where such posting does not in fact notify subcontractors and suppliers. For example, suppliers who simply drop off materials at the job site may never enter the trailer. Alternatively, there may be multiple job sites. If a notice is visible only to front-line employees of a subcontractor, is that sufficient to inform the subcontractor’s management of the existence of the bond? Would an email suffice, or a clause in standard terms which all subcontractors are required to acknowledge? These and other questions will remain to be addressed over time as the extent of this new obligation is defined by parties and courts. Read More … https://www.jdsupra.com/legalnews/scc-provides-guidance-on-trustees-duty-40482/

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Most insurance agents should use a surety expert

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While surety is technically an insurance product, most insurance agents know it’s significantly different than traditional P&C coverages. Surety experts know what to look for in a client’s submission to give them the best possible chance of qualifying for the bond they need. In fact, I would argue that surety is more like banking than insurance. However, many insurance agents, with only surface level knowledge of bonds, still try to place the business for their clients as a courtesy. Regardless of the reasons — many well-intentioned — this practice is akin to a brain surgeon trying to perform heart surgery. Knowledge is power Here are three reasons most insurance agents would benefit from using a surety expert instead of handling bonds themselves: No. 3: Sometimes, the best offense is a good defense. Someone said to me once that success in the agency business is really very simple: It comes down to making sure the business from new clients consistently exceeds business from existing clients. In other words, client retention is key. One of best ways to retain clients is providing exceptional service in the areas we’re best at, and having a network of outside relationships for all other specialized services. It’s the same reason we so easily give a referral to a lawyer when asked a legal question or a CPA about an accounting question. Why are bonds any different? When you do engage a surety expert to help with a client’s bond needs, it not only helps you avoid fumbling through their request yourself and possibly hurting your relationship, it can also turn you into a hero for introducing them to someone who provided a great solution to their problem. Referring bonds to a surety expert that doesn’t provide other lines of insurance can also serve to protect your client from looking on their own to solve their surety needs. If a client is left to do their own research, because their bonding need hasn’t been resolved, this creates an opportunity for another insurance agent who does write bonds to target and potentially capture their business. No. 2: Surety experts will be able to provide your clients more options. We all know that having the right markets and right relationships matter. But for some reason, when it comes to surety, the same thought process doesn’t apply for many people. In fact, because surety is a credit-based product in which character and reputation are huge factors in underwriting, the relationship between the agent and surety company is incredibly important. I’ve had numerous underwriters tell me they passed on a deal because there wasn’t a surety expert involved, but had there been, they may have written it. Surety experts also know what to look for in a client’s submission to give them the best possible chance of qualifying for the bond they need. I received a referral a few months ago from an insurance agent who tried unsuccessfully to write a bond for a client. In my conversation with the client, by asking the right questions, I uncovered more available cash. This, along with our relationship with the underwriter, allowed me to get their current surety to change their mind and provide approval. The agent was relieved. He’d solved the client’s problem, and the client was able to pursue a very lucrative contract. No. 1: Most insurance agents lose money on surety bonds One of the most difficult things about making money in the insurance business is measuring the return on commission dollars relative to the time spent. The most profitable clients are those who are straightforward in an agent’s sphere of experience. As agents step out of their comfort zone, it takes longer to figure things out and ultimately place the business. This is particularly true of bonds. Even with higher commission for surety bonds compared to other P&C lines, the inefficiencies insurance agents can experience quickly eat away at the profitability. We have agents come to us on surety bonds they have been working on for weeks, and it takes us just a couple days. Putting the client first I was always taught that when you put the client first, you’ll find you have more business than you know what to do with. Insurance agents have a tremendous opportunity to do this and strengthen their client relationships by using a surety expert each time a surety bond is needed. Dan Huckabay is the president of Commercial Surety Bond Agency (CSBA), one of the largest surety only agencies in California. CSBA works with over 300 construction companies ranging in size from one-man startups to large national firms. To reach this contributor, send email to [email protected]. The opinions expressed here are the author’s own. https://www.propertycasualty360.com/2018/03/05/most-insurance-agents-should-use-a-surety-expert/

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Int’l Demand guarantees versus sureties on first demand

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In a recent decision,(1) the Supreme Court clarified its position on sureties payable on first demand and confirmed its view on the interpretation of contractual undertakings (eg, guarantees or sureties)(2) by which one party assumes a personal liability for a third-party debt. Considering the significant different legal consequences for a beneficiary’s position following a qualification as either an abstract guarantee or an accessory surety, the guidelines provided by the Supreme Court on how it interprets wording included in such contractual undertakings are of the utmost importance for Austrian legal practice. Read More … http://www.internationallawoffice.com/Newsletters/Banking/Austria/Graf-Pitkowitz-Rechtsanwlte-GmbH/Demand-guarantees-versus-sureties-on-first-demand

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COAL MINE RECLAMATION: Federal and State Agencies Face Challenges in Managing Billions in Financial Assurances

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After mining, a coal company is required to restore the land it disturbed, e.g., by regrading or replanting. The federal government requires coal companies to get bonds to assure their payment for these activities. Federal law permits coal mine operators in some cases to guarantee these costs on the basis of their own finances, a practice known as self-bonding, rather than by securing a bond through another company or providing collateral. Some stakeholders told us that self-bonds are riskier now than before, citing industry bankruptcies and lower coal demand. We recommended that Congress consider amending the law to eliminate self-bonding. https://www.gao.gov/products/GAO-18-305

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AXA acquires XL Group in $15.3bn deal

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French insurer AXA is acquiring Bermuda-based property/casualty commercial lines re/insurer XL Group for $15.3 billion (€12.4 billion) in cash. The price represents a premium of 33 percent to XL Group closing share price on March 2, 2018. The move will shift AXA’s business profile from L&S (life & savings) business to P&C (property & casualty) business. The deal will enable the group to become the biggest global P&C commercial lines insurer based on gross written premiums, according to a company statement. The transaction increases diversification of the business, enables higher cash remittance potential and reinforced growth prospects, rebalancing the profile towards insurance risks and away from financial risks, the company said. “XL Group has the right geographical footprint, world-class teams with recognized expertise and is renowned for innovative client solutions,” said AXA CEO Thomas Buberl. “Our combined P&C commercial lines operations will have a strong position in the large and upper mid-market space, including in specialty lines and reinsurance, and will complement and further enhance AXA’s already strong presence in the SME (small and medium-sized enterprise) segment. The two companies share a common culture around people, risk management and innovation, positioning AXA uniquely for the evolving future of the P&C industry,” Buberl added. The opportunity to acquire XL Group has led AXA to review its exit strategy from its existing US operations which AXA now expects to accelerate. Together with the planned IPO (initial public offering) of AXA’s US operations (expected in the first half of 2018 subject to market conditions) and intended subsequent sell-downs, this transaction would gear AXA further towards technical margins less sensitive to financial markets. The XL acquisition will be financed by around €3.5 billion of cash at hand, around €6.0 billion from the planned US IPO and related transactions, as well as about €3.0 billion of subordinated debt. There is also $9 billion of backup bridge financing already in place. Upon completion of the transaction, the combined operations of XL Group, AXA Corporate Solutions (AXA’s large commercial P&C and specialty business) and AXA Art will be led by Greg Hendrick, currently the president and chief operating officer of XL Group, who will be appointed CEO of the combined entity and join AXA Group’s management committee, reporting to Thomas Buberl. Greg Hendrick will work closely with Doina Palici-Chehab, AXA Corporate Solutions’ executive chairwoman, and Rob Brown, AXA Corporate Solutions’ CEO, to build an integrated organization and leadership team for this new company. Following the closing, Mike McGavick, XL Group’s current CEO, will become vice-chairman of the combined P&C Commercial lines operations and special adviser to Thomas Buberl, AXA Group CEO, to advise on integration-related and other strategic matters. XL Group CEO Mike McGavick, said: “Today marks an unrivalled opportunity to accelerate our strategy with a new strength and dimension. With every confidence in how we have positioned XL Group for the future, it is a substantial testament to AXA’s leadership and commitment to maintaining the XL Group brand and culture that we have come to an alignment”. “We are excited at the opportunity to build the scale, geographical footprint, product portfolio, and the unmatched commitment to innovation that relevance in the global insurance industry requires. In AXA we have found like-minded partners committed to the absolute necessity to innovate and move this industry forward,” McGavick added. https://www.intelligentinsurer.com/news/axa-acquires-xl-group-in-15-3bn-deal-14755

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Liberty restructures global risk, reinsurance, and specialty operations

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Liberty Mutual has announced the operating structure of its recently formed Global Risk Solutions business, which will consist of specialty, reinsurance, and surety operations. The businesses included in the new arrangement are National Insurance, Global Surety, North American Specialty, and Liberty Specialty Markets (LSM). LSM is to operate all of Liberty’s reinsurance and specialty insurance businesses outside North America, and already includes Liberty’s $1.5 billion global reinsurance business, led by President of Liberty Mutual Reinsurance Dieter Winkel. The plan is to unite Liberty Mutual’s and Ironshore’s international specialty operations and the existing operations of LSM under a single management team in London. These will include operations in South America, Asia Pacific, Bermuda and Europe, as well as the recently acquired Pembroke, which will continue to operate independently from Liberty’s syndicate business. Commenting on the new arrangement, President and Managing Director of LSM, Matthew Moore said: “This move will bring together the skills and expertise of our people around the globe under one executive management to leverage our global scale and local capabilities. Each of the constituent parts of the new LSM are excellent businesses in their own right, putting customers at the heart of everything they do. “As the (re)insurance market becomes ever more globalised, it is crucial that we increase our communication and collaboration across geographic borders, to serve our customers better and grow a world beating business. It will make us easier to do business with, and help the staff and customers of every part of the new LSM to prosper.” Mark Wheeler, former Chief Executive Officer (CEO) of recently consolidated Ironshore International and Pembroke Managing Agency, will become LSM’s President, International Markets. He will be responsible for the coordination of LSM’s international business outside the UK. “There is much potential to realise as we bring our global business under one strategy, and we are determined to make that happen,” said Wheeler. “I am hugely excited by the challenges and opportunities ahead.” Tim Glover will now take over Wheeler’s former position as CEO of Pembroke. https://www.reinsurancene.ws/liberty-restructure-global-risk-reinsurance-specialty-operations/

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Auditor Wants Surety Bonds For Medicaid Providers, Saying Most Overpayments Don’t Get Paid Back

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The state auditor says he wants Medicaid providers to insure that they’ll do the work the state is paying them for by putting up some money to prove it. He’s backing a bill that he says will help the state recover money spent on fraudulent payments. Auditor Dave Yost said in December that his team found overpayments to 133 Medicaid providers since 2011 that added up to nearly $35.7 million with interest – and that more than 90 percent of that money hasn’t been paid back. Yost said he wants professional Medicaid providers to have to acquire surety bonds as insurance to back their work. “Indiana, Texas, Florida and New York already use an approach like this, and we think Ohio needs to do this too,” Yost said. Transportation and home health care agencies would be required to secure $50,000 surety bonds, and home health aides $10,000 bonds. The bill would also require Medicaid providers to complete certification before payment. Yost said most overpayments are the result of insufficient documentation or uncertified care. http://wvxu.org/post/auditor-wants-surety-bonds-medicaid-providers-saying-most-overpayments-dont-get-paid-back#stream/0

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