Sec. 49-2. Inclusion of taxes and other items as part of mortgage debt. Open-end mortgage. Reverse annuity mortgage. Negative amortization.
Sec. 49-2. Inclusion of taxes and other items as part of mortgage debt. Open-end mortgage. Reverse annuity mortgage. Negative amortization. (a) Premiums of
insurance, taxes and assessments paid by the mortgagee and payments of interest or
installments of principal due on any prior mortgage or lien by any subsequent mortgagee
or lienor of any property to protect his interest therein, are a part of the debt due the
mortgagee or lienor.
(b) Advancements may be made by a mortgagee for repairs, alterations or improvements and are a part of the debt due the mortgagee, provided (1) advancements for such
repairs, alterations or improvements shall not be made if the indebtedness at the time
of the advancement exceeds the amount of the original mortgage debt; (2) the advancements shall not exceed the difference between the indebtedness at the time of the advancement and the original mortgage debt, if the original mortgage debt is greater than
the then indebtedness; (3) the total amount of all of the advancements for repairs, alterations and improvements outstanding at any time shall not exceed (A) one thousand
dollars as to mortgages executed and recorded after October 1, 1947, but before October
1, 2004, or (B) five thousand dollars as to mortgages executed and recorded on or after
October 1, 2004; and (4) the terms of repayment of the advancements shall not increase
the time of repayment of the original mortgage debt.
(c) Advancements may also be made by a mortgagee, or the assignee of any mortgagee, under an open-end mortgage to the original mortgagor, or to the assign or assigns
of the original mortgagor who assume the existing mortgage, or any of them, and any
such mortgage debt and future advances shall, from the time such mortgage deed is
recorded, without regard to whether the terms and conditions upon which such advances
will be made are contained in the mortgage deed and, in the case of an open-end mortgage
securing a commercial revolving loan, a consumer revolving loan or a letter of credit,
without regard to whether the authorized amount of indebtedness shall at that time or
any time have been fully advanced, be a part of the debt due such mortgagee and be
secured by such mortgage equally with the debts and obligations secured thereby at the
time of recording the mortgage deed and have the same priority over the rights of others
who may acquire any rights in, or liens upon, the mortgaged real estate subsequent to
the recording of such mortgage deed, provided: (1) The heading of any such mortgage
deed shall be clearly entitled "Open-End Mortgage"; (2) the mortgage deed shall contain
specific provisions permitting such advancements and, if applicable, shall specify that
such advancements are made pursuant to a commercial revolving loan agreement, a
consumer revolving loan agreement or a letter of credit; (3) the mortgage deed shall
state the full amount of the loan therein authorized; (4) the terms of repayment of such
advancements shall not extend the time of repayment beyond the maturity of the original
mortgage debt, provided this subdivision shall not be applicable where such advancements are made or would be made pursuant to a commercial revolving loan agreement,
a consumer revolving loan agreement or a letter of credit, and the mortgage deed specifies that such advancements are repayable upon demand or by a date which shall not
be later than thirty years from the date of the mortgage; (5) such advancements shall be
secured or evidenced by a note or notes signed by the original mortgagor or mortgagors
or any assign or assigns of the original mortgagor or mortgagors who assume the existing
mortgage, or any of them, but no note shall be required with respect to any advancements
made pursuant to a commercial revolving loan agreement, a consumer revolving loan
agreement or a letter of credit as long as such advancements are recorded in the books
and records of the original mortgagee or its assignee; (6) the original mortgage shall be
executed and recorded after October 1, 1955; (7) the original mortgagor or mortgagors,
or any assign or assigns of the original mortgagor or mortgagors who assume the existing
mortgage, or any of them, are hereby authorized to record a written notice terminating
the right to make such optional future advances secured by such mortgage or limiting
such advances to not more than the amount actually advanced at the time of the recording
of such notice, provided a copy of such written notice shall also be sent by registered
or certified mail, postage prepaid and return receipt requested, to the mortgagee, or a
copy of such written notice shall be delivered to the mortgagee by a proper officer or
an indifferent person and a receipt for the same received from the mortgagee, and such
notice, unless a later date is recorded or specified in the notice, shall be effective from
the time it is received by the mortgagee; (8) except that if any such optional future
advance or advances are made by the mortgagee, or the assignee of any mortgagee, to
the original mortgagor or mortgagors, or any assign or assigns who assume the existing
mortgage, or any of them, after receipt of written notice of any subsequent mortgage,
lien, attachment, lis pendens, legal proceeding or adjudication against such real property,
then the amount of any such advance, other than an advance made pursuant to a commercial revolving loan agreement or a letter of credit, shall not be a priority as against any
such mortgage, lien, attachment, lis pendens or adjudication of which such written notice
was given; (9) any notice given to the mortgagee under the terms of subdivision (8) of
this subsection shall be deemed valid and binding upon the original mortgagee or any
assignee of the original mortgagee, in the case of a mortgagee other than a banking
institution, on the next business day following receipt by such mortgagee of such notice
sent by registered or certified mail, postage prepaid and return receipt requested, or by
hand delivery with a signed receipt, and in the case of a mortgagee which is a banking
institution, on the next business day following receipt at the main office of such banking
institution of such notice sent by registered or certified mail, postage prepaid and return
receipt requested, or by hand delivery with a signed receipt. For the purposes of this
subsection: (A) "Banking institution" means a bank and trust company, a national banking association having its main office in this state, a savings bank, a federal savings
bank having its main office in this state, a savings and loan association, a federal savings
and loan association having its main office in this state, a credit union having assets of
two million dollars or more, or a federal credit union having its main office in this state
and having assets of two million dollars or more; (B) "commercial revolving loan"
means a loan to a foreign or domestic corporation, partnership, limited liability company,
sole proprietorship, association or entity, or any combination thereof, the proceeds of
which are not intended primarily for personal, family or household purposes, which
loan entails advances of all or part of the loan proceeds and repayments of all or part
of the outstanding balance of the loan from time to time; and (C) "consumer revolving
loan" means a loan to one or more individuals, the proceeds of which are intended
primarily for personal, family or household purposes, which is secured by a mortgage
on residential real property, and is made pursuant to an agreement between the mortgagor
and mortgagee which (i) provides for advancements of all or part of the loan proceeds
during a period of time which shall not exceed ten years from the date of such agreement
and for repayments of the loan from time to time, (ii) provides for payments to be applied
at least in part to the unpaid principal balance not later than ten years from the date of
the loan, (iii) does not authorize access to the loan proceeds by a credit card or any
similar instrument or device, whether known as a credit card, credit plate, or by any
other name, issued with or without a fee by an issuer for the use of the cardholder in
obtaining money, goods, services, or anything else of value on credit, and (iv) does not
provide that such a revolving loan to more than one mortgagor will be immediately due
and payable upon the death of fewer than all the mortgagors who signed the revolving
loan agreement. Nothing in this subsection shall affect the validity or enforceability of
any loan agreement which provides for future advancements by a lender to a borrower
as between such parties or their heirs, successors or assigns, or shall affect the validity
or enforceability of any mortgage securing any such loan that would be valid and enforceable without the provisions of this subsection.
(d) (1) Any mortgage to secure advancements made by a mortgagee or its assignee
to a mortgagor pursuant to the terms of a mortgage securing a reverse annuity mortgage
loan, as defined in subdivision (4) of subsection (a) of section 36a-265, shall be sufficiently definite and certain and valid to secure all money actually advanced pursuant to
and in accordance with its terms, whether at or subsequent to closing of the loan, up to
but not exceeding the full amount of the loan therein authorized with the same priority
as if all such money had been advanced at the time such mortgage was delivered if such
mortgage sets forth: (A) That it is a "reverse annuity mortgage loan" and contains a
reference to subdivision (4) of subsection (a) of section 36a-265; (B) the full amount
of the loan authorized; (C) a statement of the dates on which such advancements are to
be made and the amounts of such advancements; and (D) the events which will give
rise to the maturity of the loan.
(2) The mortgagee or its assignee and the mortgagor may subsequently modify
the dates set forth in the mortgage for advancements by a writing setting forth such
modification signed by the mortgagee or its assignee and the mortgagor and recorded
upon the proper land records. Such modification shall in no way limit or otherwise affect
the priority of such mortgage.
(e) Any mortgagee of real property located in this state may contract with the mortgagor in connection with the mortgage loan for interest to be paid currently or to accrue,
and, if such interest is to accrue, for such accrued interest to be added to the principal
mortgage debt on which interest may be charged and collected. Such accrued interest
which is added to the principal mortgage debt shall be secured by the mortgage to the
same extent as the original principal of such mortgage debt.
(1949 Rev., S. 7192; 1955, S. 2969d; P.A. 73-587; P.A. 79-158, S. 2; 79-359, S. 1; 79-602, S. 61; P.A. 80-423, S. 1,
3; 80-483, S. 130, 186; P.A. 81-251; P.A. 82-243, S. 1, 3; P.A. 88-271, S. 1; P.A. 89-84; P.A. 96-180, S. 160, 166; P.A.
99-36, S. 33; P.A. 04-132, S. 5; P.A. 06-156, S. 1.)
History: P.A. 73-587 replaced Subsec. (c)(3) which had stated that advancements "shall not exceed the difference
between the indebtedness at the time of such advancement and the original mortgage debt" with provision prohibiting
indebtedness from exceeding the stated amount of the mortgage; P.A. 79-158 added Subsec. (d); P.A. 79-359 amended
Subsec. (c) to specify that mortgage debt and future advances are part of debt due "without regard to whether the terms ...
upon which such advances will be made are contained in the mortgage deed, and, in the case of an open-end mortgage
securing a commercial revolving loan, without regard to whether the stated amount of indebtedness shall ... have been
fully advanced", to add provision re advancements made pursuant to commercial revolving loan agreement in Subdivs.
(2), (5) and (8) to rephrase Subdiv. (3) and to define "commercial revolving loan" for purposes of the Subsec.; P.A. 79-602 made minor changes in wording of Subsecs. (a) and (b); P.A. 80-423 added references to letters of credit in Subsec.
(c) and made minor changes in wording; P.A. 80-483 made technical grammatical changes in Subsec. (a) and replaced
numeric Subdiv. indicators with alphabetic indicators in Subsec. (d)(1); P.A. 81-251 amended Subsec. (c) by adding the
words "partnership, association or entity, or any combination thereof" in the definition of a commercial revolving loan;
P.A. 82-243 amended Subsec. (c) by providing that Subdiv. (4) is not applicable to certain advancements which are
repayable upon demand, and by including a loan to a "sole proprietorship" in the definition of a commercial revolving
loan and added Subsec. (e) authorizing a mortgagee to contract with the mortgagor for the accrual of interest and the addition
of that accrued interest to the principal mortgage debt; P.A. 88-271 amended Subsec. (c) by extending the application of
the section to consumer revolving loans; P.A. 89-84 amended Subsec. (c)(9) by adding Subpara. designations and adding
Subpara. (B) re notice to a mortgagee which is a banking institution and made technical changes; P.A. 96-180 changed
the first reference in Subsec. (d)(1) from "subdivision (5) of subsection (a) of section 36a-265" to "subdivision (4) of
subsection (a) of section 36a-265", effective June 3, 1996 (Revisor's note: A second reference to Sec. 36a-265 (a)(5) was
changed editorially by the Revisors for consistency); P.A. 99-36 made technical changes in Subsec. (c); P.A. 04-132
amended Subsec. (b) by increasing maximum amount of advancements for repairs, alterations and improvements from
$1,000 to $5,000 as to mortgages executed and recorded on or after October 1, 2004, and by making technical and conforming changes; P.A. 06-156 amended Subsec. (c)(9) by making technical changes and redefining "commercial revolving
loan" in Subpara. (B).
See Sec. 49-4b re open-end mortgage as security for guarantor.
These payments give no right to foreclosure apart from debt. 75 C. 375; 124 C. 337. Provisions not exclusive; payments
made by second mortgagee on principal of first mortgage and for appraisal after fire may be added to debt secured by
second mortgage. 105 C. 176. Recovery for payments on prior mortgage by mortgagor from his grantee. 112 C. 611. Cited.
115 C. 655. Cited. 116 C. 334. Cited. 120 C. 671. Cited. 139 C. 373. Cited. 146 C. 523. Cited. 185 C. 463. Cited. 219 C. 772.
Cited. 2 CS 142. Cited. 3 CS 105. Inclusion of taxes and assessments in the mortgage debt allowed only if paid by
mortgagee. 11 CS 454.
Subsec. (c):
Cited. 202 C. 566.