In September 2016, the National Multistate Licensing System and Registry (NMLS) launched the Electronic Surety Bond, which replaces the paper surety bonds that have traditionally been required for licensing. These electronic bonds are created and managed within the NMLS. The combination of Scott Bonds Services’ industry-leading service and this new, improved process makes bond execution, delivery, and management easier and much more efficient.
There will naturally be a learning curve as you navigate the new Electronic Surety Bond process, and the Scott Bond Services team is an excellent resource for all your Electronic Surety Bond questions. We’ve been tracking the Electronic Surety Bond initiative since its early planning stages and worked with the surety companies we represent to ensure all involved are prepared for this change.
Electronic Surety Bonds
An Electronic Surety Bond is the same legal instrument as a paper bond. The bond language is consistent, and there is no change to any of the obligations of any parties to the bond. There are essentially no differences between Electronic Surety Bonds and Paper Bonds besides their methods of delivery.
Other questions related to Electronic Surety Bonds (ESB)
What is the benefit of the Electronic Surety Bond system?
Primarily, the elimination of paper! From bonds themselves to riders to renewal/continuation documents, no more paper via snail mail. By using Electronic Surety Bonds, the NMLS aims to make the bonding process dramatically more efficient. The new system allows online electronic bond issuance and management, submission of Electronic Surety Bonds to the relevant regulatory authorities, and monitoring for all related parties.
Which states currently offer Electronic Surety Bonds?
Beyond the states included in the initial September 2016 rollout, there are additional states adopting ESB in January of 2017, & NMLS plans to add many more over time. To see which states are included, you can view the current ESB Adoption Table here – View map.
What types of licenses are transitioning to Electronic Surety Bonds and when?
This varies by state, and each state is developing its own implementation plan, including:
- which license types are eligible to provide Electronic Surety Bonds
- whether Electronic Surety Bonds are optional or mandatory
- if mandatory, when new licensees must comply and deadlines for existing licensees to convert paper bonds to Electronic Surety Bonds
View the current ESB Adoption Table to see state by state details here – View the licenses.
How do I get started with Electronic Surety Bonds?
Licensees must first grant their bond provider (the broker not the surety itself) access to work on their behalf in the NMLS. Once authorization is granted, licensees will continue to make requests via normal channels as they have in the past. The bond provider will complete each request in NMLS, and then, the system will prompt the licensee to review the item and complete the process (only a few clicks). Upon completion, the item is automatically made available to the State regulator. This process eliminates waiting to receive documents by mail, signing, and mailing or uploading to the state. NMLS stores the bonds for all authorized parties to review at any time.
Are additional resources available on Electronic Surety Bonds?
The Scott Bond Services team is available & happy to assist you and answer any questions. In addition, the NMLS Resource Center offers good information including step by step quick guides.
What is NMLS?
NMLS is an online system for managing state licensing. It was originally the Nationwide Mortgage Licensing System & Registry and was designed to help states manage licensing for the mortgage industry. It has since been utilized for other licenses related to financial services including collection agents, money transmitters, and consumer lenders. Thus, it is now referred to as the Nationwide Multistate Licensing System to reflect its growth beyond the mortgage industry. It was created by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) and is owned and operated by the State Regulatory Registry LLC (SRR), a wholly owned subsidiary of CSBS.