What happens if an action is commenced on a surety bond?

When an action is commenced on a surety bond, it indicates that a claim has been made against the bond, typically due to a breach of obligations by the bondholder, such as failing to comply with regulations or legal requirements. In California mortgage lending, if an action is initiated on a surety bond, it may suggest that the financial security the bond provides is being called into question.

As a result, a filing of a new bond may be required to ensure that there is adequate financial backing in place. This requirement acts as a safeguard for consumers and ensures the ongoing compliance of the licensed entity with state regulations. It reflects the need for the lender or licensee to maintain a valid surety bond as part of their regulatory obligations, which protects borrowers and upholds the integrity of the lending process.

Thus, requiring a new bond in such circumstances is a standard procedure intended to maintain confidence in the licensing system and protect all parties involved.