Substitute Senate Bill No. 157
Public Act No. 04-105
AN ACT CONCERNING MORTGAGE RATE LOCK-INS.
Be it enacted by the Senate and House of Representatives in General Assembly convened:
Section 1. Section 36a-705 of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):
As used in this section and sections 36a-706, as amended by this act, [and] 36a-707 and section 3 of this act, unless the context otherwise requires:
(1) "First mortgage loan" means [any loan made to an individual, the proceeds of which are to be used primarily for personal, family or household purposes, which loan is secured by a mortgage upon any interest in one-to-four-family residential, owner-occupied real property located in this state which is not subject to any prior mortgages. The term includes the renewal or refinancing of an existing first mortgage loan] "first mortgage loan", as defined in section 36a-485;
(2) "Mortgage broker" means "first mortgage broker", as defined in section 36a-485, who is licensed or required to be licensed under sections 36a-485 to 36a-498a, inclusive;
[(2)] (3) "Mortgage lender" means [any person engaged in the business of making first mortgage loans, including, but not limited to, banks, out-of-state banks, Connecticut credit unions, federal credit unions, out-of-state credit unions and first mortgage lenders required to be licensed under sections 36a-485 to 36a-498, inclusive] "mortgage lender", as defined in section 36a-485, who is required to be licensed under section 36a-485 to 36a-498a, inclusive, except that the term shall include a bank, out-of-state bank, Connecticut credit union, federal credit union and out-of-state credit union; and
[(3)] (4) "Mortgage rate lock-in" means [any] a written [agreement with] or electronically transmitted confirmation issued to a mortgage applicant [made] or the representative of such applicant by a mortgage lender or [its] the lender's representative, prior to the issuance of a first mortgage loan commitment, [in which the mortgage lender agrees] stating that a particular rate, number of points or variable rate terms will be the rate, number of points, or variable rate terms at which [it] the lender will [lend] make the loan, provided the first mortgage loan is closed [within] by a specified [period] date, and the applicant qualifies for the loan in accordance with the lender's standards of [credit worthiness] creditworthiness.
Sec. 2. Section 36a-706 of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):
(a) (1) No mortgage lender shall [enter into a mortgage rate lock-in agreement unless such agreement is in writing] commit to a first mortgage loan applicant or the applicant's representative that the lender will make the loan at a specified rate if the loan is closed by the expiration of a specified period of time except by issuing a mortgage rate lock-in, and the period for which the terms are locked in is at least as long as the mortgage lender's good faith estimate of the anticipated time from when the mortgage loan application is submitted to the lender to the time when such lender will be ready to close such loan, taking into consideration current market conditions and the processing requirements for the type of first mortgage loan in question. (2) In the event a mortgage rate lock-in [agreement is executed] is issued after the mortgage loan application is submitted to the lender, the minimum period for which the terms may be locked in shall be the period determined in accordance with subdivision (1) of this subsection, less the number of days elapsed since the application was submitted to the lender.
(b) Any first mortgage loan application for which a mortgage rate lock-in [agreement] has been issued shall, unless it is denied in accordance with the mortgage lender's standards of [credit worthiness] creditworthiness, be closed at the terms specified in the mortgage rate lock-in [agreement] regardless of whether the specified lock-in [period] date has expired, unless the failure to close the first mortgage loan is the result of the following: (1) The applicant has failed to provide information or documentation required by the lender in a timely manner; (2) the applicant or the applicant's attorney has failed to close the first mortgage loan on or before the date specified by the mortgage lender; (3) the applicant has failed to produce, at or before the closing, all of the documentation specified by the mortgage loan commitment as being required for closing; or (4) the applicant has provided or omitted any information, in the application or subsequently, which upon verification proves to be significantly inaccurate causing the need for review or further investigation by the lender. Information is significantly inaccurate if the information as verified would cause the applicant to be disqualified for the type of first mortgage loan for which the applicant has applied or would cause the secondary market source for which the first mortgage loan is being originated to refuse to purchase the loan.
(c) In any case where a first mortgage loan has not been closed, and the application has not been rejected in accordance with the mortgage lender's standards of [credit worthiness] creditworthiness, ninety days after the filing of an application for a first mortgage loan with an initial loan to value ratio of eighty per cent or less or one hundred twenty days after filing an application for a first mortgage loan with an initial loan to value ratio of more than eighty per cent, or a first mortgage loan to be insured or guaranteed by any agency of the federal government, or any state or municipal government, or any quasi-governmental agency, whether or not there has been a mortgage rate lock-in, the applicant shall be entitled upon written request, which [must] shall be made [within] not later than thirty days [of] after the expiration of the ninety or one hundred twenty day period, as applicable, to a full refund of all funds paid to the mortgage lender unless the failure to close was caused by the applicant for one of the reasons set forth in subdivisions (1) to (4), inclusive, of subsection (b) of this section or the applicant has requested a closing date which is later than ninety days after application for a first mortgage loan with an initial loan to value ratio of eighty per cent or less or one hundred twenty days for a first mortgage loan with an initial loan to value ratio of more than eighty per cent or which is to be insured or guaranteed by any agency of the federal government, or any state or municipal government, or any quasi-governmental agency.
(d) For the purposes of subsections (b) and (c) of this section:
(1) An applicant shall be deemed to have provided information or documentation in a timely manner if such information or documentation is delivered to the mortgage lender or a representative [thereof within] of the mortgage lender not later than seven calendar days after it is requested.
(2) If a written first mortgage loan commitment issued by a mortgage lender contains any conditions to be satisfied by the applicant, the mortgage lender shall specify a closing date no sooner than seven calendar days after the issuance of [a written] such commitment unless an earlier date is requested by the applicant.
(3) Any new information or documentation requested by the mortgage lender within seven calendar days before the expiration of any rate lock-in period shall serve to extend the rate lock-in period by seven calendar days from the date of such request. Information or documentation is not new if the request is made necessary by inaccuracies in or omissions from previously provided information, by changes in the information previously provided by the applicant, or questions raised as the result of appraisals, pest inspections, water or sewer tests, engineering reports or reports of a similar nature.
(4) If an applicant chooses to change the type or amount of a first mortgage loan for which application is made, or does not qualify for a particular type or amount of first mortgage loan and chooses to apply for another, any mortgage rate lock-in [agreement] shall be void and any subsequent rate lock-in shall be evidenced by a new [written agreement] mortgage rate lock-in and the application shall be considered a new application for the purposes of sections 36a-705 to 36a-707, inclusive, as amended by this act. [, be considered a new application. ]
(5) A mortgage rate lock-in [agreement] shall not be binding on the mortgage lender in connection with the application for any first mortgage loan which is to be insured or guaranteed by any agency of the federal government or any state or municipal government or quasi-governmental agency in the event the loan program for which the applicant has applied becomes unavailable subsequent to filing an application because of actions taken by that governmental agency. In such cases the applicant shall be entitled to a refund of all funds paid by the applicant which have not actually been expended by the mortgage lender.
(6) If the mortgage lender requires that the closing of the first mortgage loan be conducted by a particular attorney or law firm, and that attorney or law firm is not available to conduct the closing before a first mortgage loan commitment period or rate lock-in period expires, the mortgage lender shall extend the first mortgage loan commitment or rate lock-in period until the designated attorney is available to conduct the closing.
Sec. 3. (NEW) (Effective from passage) No mortgage broker shall collect a rate lock-in fee, except where required by a governmental agency to be collected directly by the mortgage broker, issue a mortgage rate lock-in or otherwise represent to a first mortgage loan applicant or the applicant's representative that the loan will be made at a specified rate if the loan is closed by the expiration of a specified period of time. Notwithstanding the provisions of this section, a mortgage broker may provide a mortgage lender's mortgage rate lock-in to a mortgage loan applicant or the applicant's representative on behalf of such mortgage lender and collect a rate lock-in fee on the mortgage lender's behalf payable to the mortgage lender.
Approved May 21, 2004