AN ACT PROHIBITING ABUSIVE PRACTICES IN THE MAKING OF REVERSE ANNUITY MORTGAGE LOANS.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) (Effective July 1, 2005) (a) No person shall offer or make a reverse annuity mortgage loan, as defined in section 36a-265 of the general statutes, that (1) authorizes such person to take an interest in the appreciated value of residential real property; (2) charges a fee when the mortgage is fully paid upon the occurrence of the events specified in subparagraphs (A) to (C), inclusive, of subdivision (2) of subsection (e) of said section 36a-265; or (3) assesses a prepayment penalty in excess of three per cent of the balance prepaid for any payment occurring earlier than one year after consummation of the loan, two per cent of the balance prepaid for any payment occurring between one and two years after consummation of the loan, and one per cent of the balance prepaid for any payment occurring after two years but before three years after consummation of the loan.

(b) Each person who offers or makes a reverse annuity mortgage loan shall provide at the time of the signing of such mortgage loan by the borrower, written notice to the borrower, substantially similar to the following: "You have a three-day right to rescind this reverse annuity mortgage loan. If you are thinking about whether this reverse annuity mortgage loan is appropriate for you, you may wish to contact an independent housing counselor. The United States Department of Housing and Urban Development certifies housing counselors. To obtain a list of such certified counselors, you should contact the United States Department of Housing and Urban Development at its Connecticut office or visit the department's web site.".

Statement of Purpose:

To (1) prohibit any person from offering a reverse annuity mortgage loan that (A) authorizes the mortgage lender to take an interest in the appreciated value of the home, (B) assesses a maturity fee, or (C) assesses a prepayment penalty in excess of three per cent of the borrowed amount if paid off in the first year, two per cent of the borrowed amount if paid off in the second year, and one per cent of the borrowed amount if paid off in the third year, and (2) require the mortgage lender to notify consumers that they may wish to contact an independent housing counselor if they are unsure about whether to rescind the reverse annuity mortgage loan.

[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.]