Sec. 36a-498a. Prepaid finance charges; restrictions. Secondary mortgage loan; demand for payment prior to maturity; liability for noncompliance; deed.
Sec. 36a-498a. Prepaid finance charges; restrictions. Secondary mortgage
loan; demand for payment prior to maturity; liability for noncompliance; deed.
(a) No mortgage lender licensee or mortgage correspondent lender licensee under section 36a-489 and no person exempt from licensure under subdivisions (1), (2), (5) and
(6) of section 36a-487 making a first mortgage loan may charge, impose or cause to be
paid, directly or indirectly, prepaid finance charges that exceed in the aggregate, the
greater of five per cent of the principal amount of the loan or two thousand dollars. If
the proceeds of the loan are used to refinance an existing loan, the aggregate of the
prepaid finance charges for the current refinancing and any previous financings by such
licensee or exempt person or affiliate of such licensee or exempt person within two
years of the current refinancing shall not exceed the greater of five per cent of the
principal amount of the initial loan or two thousand dollars. The provisions of this section
shall not prohibit such licensee or exempt person from charging, imposing or causing
to be paid, directly or indirectly, prepaid finance charges in addition to those permitted
by this section in connection with any additional proceeds received by the borrower in
the refinancing, provided such prepaid finance charges on the additional proceeds shall
not exceed five per cent of the additional proceeds.
(b) (1) No mortgage lender or mortgage correspondent lender making a secondary
mortgage loan may (A) charge, impose or cause to be paid, directly or indirectly, in
connection with any secondary mortgage loan transaction, prepaid finance charges that
exceed in the aggregate eight per cent of the principal amount of the loan, or (B) include
in the loan agreement, under which prepaid finance charges have been assessed, any
provision that permits the mortgage lender or mortgage correspondent lender to demand
payment of the entire loan balance prior to the scheduled maturity, except that such
loan agreement may contain a provision that permits the mortgage lender or mortgage
correspondent lender to demand payment of the entire loan balance if any scheduled
installment is in default for more than sixty days or if any condition of default set forth
in the mortgage note exists.
(2) Any mortgage lender, mortgage correspondent lender or mortgage broker who
fails to comply with the provisions of this subsection shall be liable to the borrower in
an amount equal to the sum of: (A) The amount by which the total of all prepaid finance
charges exceeds eight per cent of the principal amount of the loan; (B) eight per cent
of the principal amount of the loan or two thousand five hundred dollars, whichever is
less; and (C) the costs incurred by the borrower in bringing an action under this subsection, including reasonable attorney's fees, as determined by the court, provided no such
mortgage lender, mortgage correspondent lender or mortgage broker shall be liable
for more than the amount specified in this subsection in a secondary mortgage loan
transaction involving more than one borrower.
(c) For purposes of this section, "additional proceeds" has the same meaning as
provided in subdivision (3) of section 36a-746e and "prepaid finance charge" has the
same meaning as provided in subdivision (7) of section 36a-746a.
(d) Any mortgage deed to secure a secondary mortgage loan that is recorded in the
land records of any town shall contain the word "Mortgage" in the heading, either in
capital letters or underscored and shall contain the principal amount of the loan.
(P.A. 01-34, S. 13; P.A. 04-69, S. 11; P.A. 06-45, S. 6: P.A. 07-156, S. 15; P.A. 08-176, S. 31, 54.)
History: P.A. 04-69 substituted Subdiv. "(7)" for "(6)" in definition of "prepaid finance charge"; P.A. 06-45 included
in prohibition against lenders charging borrowers excessive prepaid finance charges, persons making five or fewer first
mortgage loans within any period of 12 consecutive months, effective May 8, 2006; P.A. 07-156 inserted "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. 15, from September 30, 2008, to July 1, 2008, designated existing provisions as Subsec. (a) and amended same to add
"mortgage correspondent lender licensee", make a technical change and delete definitions of "additional proceeds" and
"prepaid finance charge", added said definitions as Subsec. (c), added Subsec. (b) re secondary mortgage loan and added
Subsec. (d) re mortgage deed to secure a secondary mortgage loan, effective July 1, 2008.