Sec. 36a-746c. Prohibited provisions in loan agreement.
Sec. 36a-746c. Prohibited provisions in loan agreement. A high cost home loan
shall not provide for or include the following:
(1) For a loan with a term of less than seven years, a payment schedule with regular
periodic payments that when aggregated do not fully amortize the outstanding principal
balance, except that this limitation does not apply to a loan with maturities of less than
one year if the purpose of the loan is a bridge loan, as used in 12 CFR 226.32, as amended
from time to time, connected with the acquisition or construction of a dwelling intended
to become the borrower's principal dwelling;
(2) A payment schedule with regular periodic payments that cause the principal
balance to increase;
(3) A payment schedule that consolidates more than two periodic payments and pays
them in advance from the proceeds, unless such payments are required to be escrowed by
a governmental agency;
(4) An increase in the interest rate after default or default charges in excess of five
per cent of the amount in default;
(5) A refund calculated by a method less favorable than the actuarial method, as
defined by Section 933(d) of the Housing and Community Development Act of 1992,
15 USC 1615(d), as amended from time to time, for rebates of interest arising from a
loan acceleration due to default;
(6) A prepayment penalty;
(7) A waiver of participation in a class action or a provision requiring a borrower,
whether acting individually or on behalf of others similarly situated, to assert any claim
or defense in a nonjudicial forum that: (A) Utilizes principles which are inconsistent
with the law as set forth in the general statutes or common law; (B) limits any claim or
defense the borrower may have; or (C) is less convenient, more costly or more dilatory
for the resolution of a dispute than a judicial forum established in this state where the
borrower may otherwise properly bring a claim or defense; or
(8) A call provision that permits the lender, in its sole discretion, to accelerate the
indebtedness. This prohibition shall not apply when repayment of the loan is accelerated
by bona fide default, pursuant to a due-on-sale clause provision, or pursuant to another
provision of the loan agreement unrelated to the payment schedule including, but not
limited to, bankruptcy or receivership.
(P.A. 01-34, S. 5; P.A. 02-12, S. 2; P.A. 08-176, S. 64.)
History: P.A. 02-12 amended Subdivs. (1) and (6) by adding "as from time to time amended" and amended Subdiv.
(3) by adding "unless such payments are required to be escrowed by a governmental agency", effective April 22, 2002;
P.A. 08-176 amended Subdivs. (1) and (5) to make technical changes, amended Subdiv. (6) to delete exception re high
cost home loan prepayment penalty, and amended Subdiv. (7) to delete "mandatory arbitration clause" and add provision
re asserting of any claim or defense in nonjudicial forum, effective July 1, 2008.