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New Jersey recently introduced legislation that regulates mortgage servicing in the state. Under the new law, which takes effect July 28, servicers must be licensed and obtain a $100,000 New Jersey mortgage servicer bond in order to operate legally. The law also specifies the obligations and responsibilities of licensed servicers, such as filing annual reports, keeping records, and more By July 28, mortgage servicers in New Jersey will need to obtain a license in order to operate legally in the state. This requirement was recently introduced with the passing of bill A4997, also known as the Mortgage Servicers Licensing Act. Moreover, persons exempt from licensure that service five or fewer residential mortgage loans per year are also exempt from the provisions of this bill. Read More … https://mortgageorb.com/new-jersey-passes-licensing-law-for-nonbank-mortgage-servicers

Whether you are the owner or the general contractor, dealing with mechanic’s liens filed by subcontractors or suppliers can be frustrating and, in some cases, present the very real threat of having to pay twice for work or materials. Most, if not all, states’ lien laws provide that prior payment, whether by owner to contractor or contractor to subcontractor, are not a legal defense to a lien filed by a lower tier subcontractor or supplier who has not been paid. While there may be legal penalties for filing improper or exaggerated liens, when a lien is filed, it causes a ripple effect “upstream.” First, it is almost certainly a violation of the owner’s mortgage. The failure to pay that led to the lien is a default under the owner/contractor and contractor/subcontractor agreement. It makes no difference if the lien is legitimate or illegitimate because once filed it is a cloud on title and will delay or preclude refinancing, sale, or the approval by a lender of the owner’s next construction draw (which can then delay payment and cause more filed liens). Most states have statutes that allow such liens to be “bonded over,” but that means going to a surety company for the bond, which may require full cash collateral. Bonds not only cost money, but also absorb bond capacity that is then no longer available for other projects until the liens are released. If an owner has to bond off a lien, it normally does not have a relationship with a surety company and has to go through a complete financial disclosure process to qualify for a bond. Finally, some states (Texas and Arkansas, for example) mandate that the amount of the lien bond has to be twice the amount of the filed lien. Obviously, such a requirement can cause serious issues particularly where the underlying lien is arguably invalid. But…what if there is an existing payment bond already in place for the project, normally provided by the prime contractor (the costs of which were passed through to the owner)? That bond does not prevent the filing of liens, but simply gives the lien claimant another “legal” way to try to get paid. Most claimants will make a formal claim against the bond but also assert liens. d. One answer: Most states should follow the lead of Tennessee, which allows a copy of an existing payment bond, if it meets certain criteria, to be filed of record in the same place as the filed lien, and the filing of the bond automatically “discharges” the lien of record, just like a separate filed lien bond. No separate lien bond from a surety is needed. While the underlying dispute must still be resolved, at least the cloud on the title to the real property of the project is removed. The owner is happy. The payments continue to be made. The claimant is normally very happy to now be able to sue on the payment bond. The Tennessee statute is located at T.C.A. 66-11-142(b). If your state does not have such a statute, consider “lobbying” for a change. The local chapters of the various construction trade associations, such as ABC and AGC, may be willing to provide legislative support. https://www.lexology.com/library/detail.aspx?g=3c30bd7b-c786-42b0-b26c-1971c75f7596

Proposed state legislation would evaluate if the current $15,000 bond should be increased to match current economic conditions and construction risks Contractors who wish to operate in California need to go through a licensing procedure with the Contractors’ State License Board. This process entails providing a $15,000 surety bond. A recent legislation, Senate Bill 610, may lead to changes in the licensing and bonding requirements for contractors. The bill was introduced in February 2019 and is now on the move. It has already passed out of committee in the Senate and is undergoing hearings. If introduced as law, it would require the board to conduct a study on whether the current California contractor license bond amount is sufficient, or if it should be increased. Find out the essential details about the proposed bill and how it may affect your California contracting business. Changes in Senate Bill 610 The proposed bill, if enacted, would lead to a study on the appropriateness of the current contractor license surety bond amount in California. The amount now is $15,000 — among the lowest bonding requirement for contractors in the country. The board will have to evaluate whether an increase is necessary to match the current economic conditions and the risks involved in construction contracting. The license board will have to announce its findings, and the recommended course of action by January 1, 2024, giving enough time to contractors to prepare for the potential changes There are a few other changes that the bill may bring if it is accepted. It would lead to an extension of the deadline for the appointment of a Registrar of Contractors by the license board from January 1, 2020, to January 1, 2024. In addition, the legislation would also make the rules for contracting businesses that have a judgment against them much stricter. In cases when there is a judgment against a licensee or personnel of record, qualifying persons and personnel of record are prohibited from serving in such roles until the judgment is satisfied. License bond amounts vary By introducing the bill in question, legislators in California are moving towards a potential increase in the contractor license bond requirement. One of the reasons for this is the fact that California is among the states that have relatively low bonding amounts for contractors. Lawmakers need to balance between ensuring enough protection for the general public, and an appropriate level of strictness towards the contractors. The contractor license bond amounts range between $1,000 and $500,000 in all the states. However, in most places, there are separate bonding requirements for the different licensing types. Thus, contractors working on larger contract amounts or on specific higher-risk jobs, need to obtain larger bonding amounts. This is currently not the case in California where all types of contractors need a $15,000 surety bond. The lowest bond amounts for contractors are in New Jersey ($1,000 to $3,000) and Idaho ($2,000), but they are exceptions. In most states, the requirements gravitate around $20,000 and above. Bonding requirements in Delaware can reach $200,000, $350,000 in North Carolina and $500,000 in South Carolina. How bonding works for contractors The purpose of requiring construction specialists to have a surety bond is to protect their customers and the state in which they operate. If you fail to follow applicable laws as a contractor, you can face a claim against your bond. It can provide fair compensation for any damages that a party may have suffered as a result. The maximum reimbursement that can be demanded from you on proven claims is the full bond amount that you have posted. That is why the bonding amount is important. Lawmakers examine various factors to assess the appropriate requirements in each state. In order to get your contractor license bond, you need to cover a small percentage of the required bond amount. It is formulated on the basis of your personal and business finances. The stronger they are, the smaller the perceived bonding risk is, which leads to a lower bonding premium. The rates that you can expect if your finances are in good shape are between 1% and 5% of the bond amount. https://www.forconstructionpros.com/business/article/21071195/california-to-examine-the-amount-of-surety-bond-for-contractors-license

The federal government should follow Ontario’s lead in addressing contractor insolvency before the federal budget bill becomes law, says the Surety Association of Canada (SAC). The federal budget bill, Bill C-97, was tabled in March and passed second reading on Apr. 30. SAC’s president Steven Ness appeared before the Standing Committee on Finance earlier this month to advocate for the need for Bill C-97 to address contractor insolvency through surety bonds that guarantee construction projects will be finished and bills will be paid. SAC is very supportive of any measure that speeds up payment in the construction industry and praised the government for taking this initiative. However, Ness suggested that leaving out any provision to deal with contractor insolvency is a serious oversight. In Ontario, changes recently implemented through the Construction Act of Ontario require surety bonds on all public projects valued at $500,000 or more. “What we did in Ontario is, we devised special bond forms that not only pay, but pay promptly,” Ness told Canadian Underwriter in an interview Thursday. “We have a fixed amount of time to review the claim submission that is brought in and once we’ve done that, we have to pay any undisputed amounts within 10 days.” The prompt payment portion of Bill 142, the Construction Act, comes into force this October. In the federal budget bill, however, there is no measure included to deal with contractor insolvency. “We spoke to the committee and said if you are not addressing that risk of insolvency, you’re making a law that brings about prompt payment, but not certainty of payment, so you are only doing half the job,” Ness said. “You can’t have prompt payment if you don’t have certainty of payment. What happens if a general contractor goes broke and can’t pay his subcontractors at all? It doesn’t matter how prompt the payment requirements are if there’s no money to pay them.” So far, Ontario is the only province to have addressed prompt payments and insolvency in legislation. Saskatchewan and Nova Scotia have passed skeleton bills, Ness reported, but they haven’t become law yet and there will likely be changes to each of them. Ness spoke at the Standing Committee on Finance May 16 along with Pierre Cadieux, SAC’s business development manager for Quebec. A simultaneous Standing Senate Committee on Banking, Trade and Commerce was held that day; representing SAC was Frank Faieta, national vice president at The Guarantee Company of North America. https://www.canadianunderwriter.ca/insurance/how-ontario-got-it-right-on-surety-1004163856/