Sec. 36a-457b. Mortgage loans to members.
Sec. 36a-457b. Mortgage loans to members. (a) Subject to the requirements of
this section, a Connecticut credit union may make one or more mortgage loans to its
members. As used in this section, the term "mortgage loan" means a closed-end loan
or line of credit secured wholly or substantially by a lien on or interest in real estate,
including a leasehold interest, and which is secured by a one-to-four family residence
that is the primary residence of a member or by any other real estate provided the aggregate of the loans made by the credit union to such mortgagor that are secured by such
other real estate do not exceed fifty thousand dollars. As used in this section and section
36a-458a, the term "real estate" includes land and any structure and other improvement
or equipment that is permanently attached to such land or structure. The term "mortgage
loan" shall not include a member business loan, as defined in section 36a-458a.
(b) A satisfactory certificate of title issued by a qualified person approved by the
Connecticut credit union, or a satisfactory policy of title insurance, shall be filed with
the lending Connecticut credit union until the mortgage loan is paid or sold.
(c) The real estate shall be appraised or otherwise suitably evaluated before any
mortgage loan is made on its security, by one or more suitable persons who are familiar
with real estate values in the community where the real estate is located. Such persons
shall be approved by the governing board of the Connecticut credit union making the
loan, or any board-appointed committee or person appropriately designated by such
governing board in accordance with the loan and insider policies of the Connecticut
credit union, provided if the loan under consideration is a loan to be insured or guaranteed
by a governmental agency, the appraiser may be one who appraised the real estate for
the governmental agency. Such appraisal or evaluation shall be in writing, state the
amount at which the real estate has been appraised or evaluated and be filed with the
lending Connecticut credit union until the loan is paid or sold.
(d) For the purposes of this subsection, the net equity value of real estate is the
appraised value determined pursuant to this subsection, reduced by the value of any
prior liens or encumbrances with the exception of leases, easements and reservations
to the United States of fissionable materials. A mortgage loan made by a Connecticut
credit union may not exceed in amount ninety per cent of the net equity value of the
real estate except:
(1) Loans guaranteed or insured by the United States government or its agencies,
provided the amount of the guaranty or insurance is at least equal to the portion of the
loan that exceeds the loan-to-value limit;
(2) Loans backed by the full faith and credit of a state government, provided the
amount of the assurance is at least equal to the portion of the loan that exceeds the loan-to-value limit;
(3) Loans guaranteed or insured by a state, municipal or local government, or its
agency, provided (A) the amount of the guaranty or insurance is at least equal to the
portion of the loan that exceeds the loan-to-value limit, and (B) the Connecticut credit
union has determined that the guarantor or insurer has the financial capacity and willingness to perform under the terms of the guaranty or insurance agreement;
(4) Loans that are renewed, refinanced or restructured without the advancement of
new funds or an increase in a line of credit, except for reasonable closing costs;
(5) Loans that are renewed, refinanced or restructured in connection with workout
situations involving existing loans from the Connecticut credit union to its members,
either with or without the advancement of new funds, where such action is consistent
with safe and sound lending practices and is a part of a clearly defined and well documented program to achieve orderly liquidation of the debt, reduce risk of loss or maximize recovery of the loan;
(6) Loans that facilitate the sale of real estate acquired by the Connecticut credit
union in the ordinary course of collecting a debt previously contracted in good faith; and
(7) Loans where all or part of such loan is made in primary reliance upon the mortgage insurance policy of a private mortgage guaranty company, licensed by the Insurance Commissioner to do business in this state and approved by the commissioner.
(e) A mortgage loan made by a Connecticut credit union secured by a first lien or
interest shall have a maturity not exceeding forty-two years from the date of its making,
and a mortgage loan to finance a manufactured home or secured by a subordinate lien
shall have a maturity not exceeding twenty years from the date of its making. For purposes of this subsection, the term "manufactured home" means a movable dwelling
containing living facilities suitable for year-round occupancy by one family, including
permanent provision for eating, sleeping, cooling and sanitation, provided such dwelling
is to be maintained as a residence of the purchaser and will, within ninety days after
purchase, be located at a manufactured housing community or other semipermanent site
within this state.
(f) A mortgage loan made by a Connecticut credit union shall require repayment
of principal and payment of interest in at least consecutive semiannual installments of
principal and interest, such payments to be sufficient to pay the loan in full not later
than forty-two years from the date of the first payment and the first payment to be made
within twenty-four months from the date of the note. The requirements for semiannual
principal payments pursuant to this subsection are not applicable to: (1) Consumer revolving loan agreements made pursuant to subsection (c) of section 49-2, (2) alternative
mortgage loans made pursuant to section 36a-265, (3) loans that may be demanded at
any time and that are secured by residential real estate, and (4) any other loan or class
of loans determined by the commissioner not to be subject to such requirements.
(g) A Connecticut credit union may make a mortgage loan secured by a first lien
or interest for the construction or repair of buildings or other improvements on the
property of the borrower, which loan may be made in installments advanced at the
discretion of the credit union as the work progresses, provided at no time shall the ratio
of the amount loaned to the then total value exceed fifty per cent or the ratio the final
loan is to bear to the value of the completed real estate, whichever is the greater. Loans
made to finance the construction of buildings and having a maturity of not more than
twenty-four months or having a maturity of not more than thirty-six months, if approved
by the commissioner, are not subject to the limitations imposed by subsection (f) of this
section.
(h) Attorneys' fees in connection with any mortgage loan made by a Connecticut
credit union, including preparation of the mortgage deed and note, title search, waivers
and closing fees or recording fees, shall be paid by the borrower unless otherwise determined by the credit union.
(i) A Connecticut credit union may make and invest in any mortgage loan, including
construction and improvement loans, insured by the Federal Housing Administration
without regard to the limitations and restrictions of this section, except that such loans
are subject to the following limitations: (1) In the case of loans secured by a first mortgage
on real estate, the contract of insurance shall contain a provision that the debentures to
be issued by the Federal Housing Administration in settlement of such insurance, in the
event of the foreclosure or default of any such loan or mortgage, shall be fully guaranteed
as to payment of principal and interest by the government of the United States, (2) if
the credit union has a commitment for such insurance, issued by the Federal Housing
Administration, it may grant a loan to a borrower for the purpose of building upon or
improving the real estate of the borrower, the money so borrowed to be advanced at the
discretion of the credit union in installments as the work progresses, provided the total
of all advances made does not exceed eighty per cent of the value of the real estate on
the date of each advance or the proportion that the final loan is to bear to the final
estimated value of the real estate, whichever is the greater, except that the final advance
may be in such an amount that the total of all advances made may equal but not exceed
the amount of such commitment. The final advance shall not be made until the buildings
or improvements have been inspected and approved by the Federal Housing Administration for an insured loan.
(j) Without regard to the limitations and restrictions of this section, a Connecticut
credit union may make and invest in any mortgage loan which the Administrator of
Veterans' Affairs guarantees, makes a commitment to guarantee or insures.
(k) A Connecticut credit union may make a mortgage loan secured by a leasehold
interest, provided the leasehold estate has a term which does not expire prior to the
maturity of the mortgage loan. The term of the leasehold estate shall not include any
period for which the lease may grant an option of renewal.
(l) A Connecticut credit union may invest its funds in mortgage loans which do not
conform to the requirements of this section, provided the governing board or a board-appointed committee has reviewed the nonconforming aspects of the particular mortgage loan or mortgage loan program and has determined such loan or program to be
prudent under the circumstances and all such mortgage loans outstanding at the time of
origination do not exceed eight per cent of the total assets of the Connecticut credit union.
The Connecticut credit union shall make a notation of the determination of whether such
loan or program is prudent and the reasons for such determination in the applicable loan
file. A loan which was included within the percentage of total assets limitation of this
subsection subsequently may be excluded if the loan is repaid or if the nonconforming
aspects are eliminated or otherwise cease to exist.
(P.A. 02-73, S. 58; P.A. 03-84, S. 60.)
History: P.A. 03-84 changed "Commissioner of Banking" to "commissioner" in Subsecs. (d)(7), (f) and (g), effective
June 3, 2003.