Ohio Surety Bond

[scorpiontracker]

I have a friend who owns a Mortgage Broker Business with a partner. His 'partner' is shutting down the business and he needs to get the business back into his name, thus requiring a Mortgage Surety Bond. The problem is he filed bankruptcy two years ago and the quotes he is getting back are more than he can afford to pay at this point..

He has asked if I would 'co-sign' the Bond to get a lower premium. I am not an owner of the company but I know that he runs a good business. However I need to make sure there are no financial risks to doing so...

First of all, I am not sure how I could sign the application if I am not an owner of the company?

Secondly, what possible financial risks do I expose myself to as a co-signer on the bond?

I want to help him, but don't want to have something hanging over me by assuming risks without any reward .

Thanks

[Admin]

Good question. By co-signing on the bond, you could be held personally responsible in the event of a claim. The surety would first try to collect from the company and the owner, but would turn to you if their collection efforts fail. You would be liable for the amount of the bond (more in some states, let me know the state and I will let you know the maximum exposure) and any legal fees the surety accumulates from the claim.

Some of our bonding companies will accept co-signers. However, our agency policy will not write bonds when co-signers are required, as there are other options out there. I know you want to help your friend, but it is going to be dificult for him to start his business if he can't afford his bond premium.

Let me know if you have any further questions.

[scorpiontracker]

The state is Ohio which is $50K. So if I understand correctly a Bond differ from 'Insurance' in which way:

1. The surety only pays the claim, if the company or owner cannot pay. And in this case the surety would also not pay unless the co-signer was not able to pay.

or

2. The surety pays the clain and then trys to get it back from the signers of the bond (in this case, the co-signer as well).

In either case, I can see why credit would play a big part in the premium in the event the signer(s) could not pay. The better the credit, the less likely they will have to pay any money out?

This is different than the cost of car insurance based on your credit score.

What if the claim is over $50K

The cost of the Bond goes from $10K without a co-signer to 2K with a co-signer with 'good' credit.