Sec. 36a-498. (Formerly Sec. 36-440m). Refundability of advance fees. Exceptions. Prohibited acts by mortgage lenders, correspondent lenders, brokers and loan originators re borrowers.
Sec. 36a-498. (Formerly Sec. 36-440m). Refundability of advance fees. Exceptions. Prohibited acts by mortgage lenders, correspondent lenders, brokers and
loan originators re borrowers. (a) Except as provided in subsection (c) of this section,
every advance fee paid or given, directly or indirectly, to a mortgage lender, mortgage
correspondent lender or mortgage broker required to be licensed pursuant to sections
36a-485 to 36a-498a, inclusive, shall be refundable.
(b) No mortgage loan originator required to be licensed pursuant to sections 36a-485 to 36a-498a, inclusive, shall accept payment of any advance fee except an advance
fee on behalf of a mortgage lender, mortgage correspondent lender or mortgage broker
licensee. Nothing in this subsection shall be construed as prohibiting the mortgage
lender, mortgage correspondent lender or mortgage broker licensee from paying a mortgage loan originator all or part of an advance fee, provided such advance fee paid is not
refundable under this section.
(c) Subsection (a) of this section shall not apply if: (1) The person providing the
advance fee and the mortgage lender, mortgage correspondent lender or mortgage broker
agree in writing that the advance fee shall not be refundable, in whole or in part; and
(2) the written agreement complies in all respects with the provisions of subsection (d)
of this section.
(d) An agreement under subsection (c) of this section shall meet all of the following
requirements to be valid and enforceable: (1) The agreement shall be dated, signed by
both parties, and be executed prior to the payment of any advance fee; (2) the agreement
shall expressly state the total advance fee required to be paid and any amount of the
advance fee that shall not be refundable; (3) the agreement shall clearly and conspicuously state any conditions under which the advance fee will be retained by the mortgage
lender, mortgage correspondent lender or mortgage broker; (4) the term "nonrefundable" shall be used to describe each advance fee or portion thereof to which the term is
applicable, and shall appear in boldface type in the agreement each time it is used; and
(5) the form of the agreement shall (A) be separate from any other forms, contracts, or
applications utilized by the mortgage lender, mortgage correspondent lender or mortgage broker, (B) contain a heading in a size equal to at least ten-point boldface type
that shall title the form "AGREEMENT CONCERNING NONREFUNDABILITY OF
ADVANCE FEE", (C) provide for a duplicate copy which shall be given to the person
paying the advance fee at the time of payment of the advance fee, and (D) include such
other specifications as the commissioner may by regulation prescribe.
(e) An agreement under subsection (c) of this section that does not meet the requirements of subsection (d) of this section shall be voidable at the election of the person
paying the advance fee.
(f) (1) No mortgage lender, mortgage correspondent lender or mortgage broker
required to be licensed pursuant to sections 36a-485 to 36a-498a, inclusive, shall enter
into an agreement with or otherwise require any person to pay the mortgage lender,
mortgage correspondent lender or mortgage broker for any fee, commission or other
valuable consideration lost as a result of such person failing to consummate a mortgage
loan, provided the mortgage lender, mortgage correspondent lender or mortgage broker
may collect such fee, commission or consideration as an advance fee subject to the
requirements of this section.
(2) No mortgage broker required to be licensed pursuant to sections 36a-485 to 36a-498a, inclusive, shall enter into an agreement with or otherwise require any person to
pay the mortgage broker any fee, commission or other valuable consideration for the
prepayment of the principal of a mortgage loan by such person before the date on which
the principal is due.
(g) (1) For the purposes of this subsection:
(A) "Unfair or deceptive act or practice" means (i) the failure to clearly and conspicuously state in the initial phase of the solicitation that the solicitor is not affiliated with
the mortgage lender, mortgage correspondent lender or mortgage broker with which the
consumer initially applied, (ii) the failure to clearly and conspicuously state in the initial
phase of the solicitation that the solicitation is based on personal information about the
consumer that was purchased, directly or indirectly, from a consumer reporting agency
without the knowledge or permission of the mortgage lender, mortgage correspondent
lender or mortgage broker with which the consumer initially applied, (iii) the failure in
the initial solicitation to comply with the provisions of the federal Fair Credit Reporting
Act relating to prescreening solicitations that use consumer reports, including the requirement to make a firm offer of credit to the consumer, or (iv) knowingly or negligently
using information from a mortgage trigger lead (I) to solicit consumers who have opted
out of prescreened offers of credit under the federal Fair Credit Reporting Act, or (II)
to place telephone calls to consumers who have placed their contact information on a
federal or state Do Not Call list; and
(B) "Mortgage trigger lead" means a consumer report obtained pursuant to Section
604 (c)(1)(B) of the federal Fair Credit Reporting Act, 15 USC 1681b, where the issuance
of the report is triggered by an inquiry made with a consumer reporting agency in response to an application for credit. "Mortgage trigger lead" does not include a consumer
report obtained by a mortgage lender or mortgage correspondent lender that holds or
services existing indebtedness of the applicant who is the subject of the report.
(2) No mortgage lender, mortgage correspondent lender, mortgage broker or mortgage loan originator shall engage in an unfair or deceptive act or practice in soliciting
an application for a mortgage loan when such solicitation is based, in whole or in part,
on information contained in a mortgage trigger lead. Any violation of this subsection
shall be deemed an unfair or deceptive trade practice under subsection (a) of section
42-110b.
(P.A. 92-132, S. 4, 5; P.A. 94-122, S. 239, 340; P.A. 02-111, S. 14; P.A. 04-69, S. 10; P.A. 06-45, S. 5; P.A. 07-118,
S. 1; 07-156, S. 14; P.A. 08-176, S. 31, 53.)
History: P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-440m transferred to Sec. 36a-498 in
1995; P.A. 02-111 replaced references to "mortgage broker" with references to "first mortgage broker" throughout, added
new Subsec. (b) re acceptance of advance fee by originator, redesignated existing Subsecs. (b) to (d) as Subsecs. (c) to (e)
and made technical changes throughout; P.A. 04-69 amended Subsecs. (a) and (b) to substitute "36a-498a" for "36a-498";
P.A. 06-45 added Subsec. (f) to prohibit mortgage lenders and first mortgage brokers from entering into agreements with
borrowers to compensate licensees for fees, commissions or other valuable consideration lost if borrowers fail to close
loan unless compensation is collected as advance fee and to prohibit first mortgage brokers from imposing fees, commissions
or other valuable consideration on borrowers for prepayment of principal of loan, effective May 8, 2006; P.A. 07-118
added Subsec. (g) to define "unfair or deceptive act or practice" and "mortgage trigger lead", to prohibit mortgage lenders
and first mortgage brokers from engaging in an unfair or deceptive act or practice in soliciting application for a first
mortgage loan if solicitation is based in any way on a mortgage trigger lead, and to provide that violation is deemed an
unfair or deceptive trade practice under Sec. 42-110b(a); P.A. 07-156 amended Subsec. (b) to substitute "licensed" for
"registered" and to insert "mortgage lender or first mortgage broker" re licensee, effective September 30, 2008; P.A. 08-176 changed effective date of P.A. 07-156, S. 14, from September 30, 2008, to July 1, 2008, added references to "mortgage
correspondent lender" and "mortgage loan originator" and made conforming changes, effective July 1, 2008.