AN ACT CONCERNING PREDATORY LENDING.

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

Section 1. Section 36a-2 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2005):

As used in this title, unless the context otherwise requires:

(1) "Affiliate" of a person means any person controlling, controlled by, or under common control with, that person;

(2) "Applicant" with respect to any license or approval provision pursuant to this title means a person who applies for that license or approval;

(3) "Automated teller machine" means a stationary or mobile unattended device, including a satellite device but excluding a point of sale terminal, at which banking transactions, including, but not limited to, deposits, withdrawals, advances, payments or transfers, may be conducted;

(4) "Bank" means a Connecticut bank or a federal bank;

(5) "Bank and trust company" means an institution chartered or organized under the laws of this state as a bank and trust company;

(6) "Bank holding company" has the meaning given to that term in 12 USC Section 1841(a), as from time to time amended, except that the term "bank", as used in 12 USC Section 1841(a) includes a bank or out-of-state bank that functions solely in a trust or fiduciary capacity;

(7) "Capital stock" when used in conjunction with any bank or out-of-state bank means a bank or out-of-state bank that is authorized to accumulate funds through the issuance of its capital stock;

(8) "Client" means a beneficiary of a trust for whom the Connecticut bank acts as trustee, a person for whom the Connecticut bank acts as agent, custodian or bailee, or other person to whom a Connecticut bank owes a duty or obligation under a trust or other account administered by such Connecticut bank, regardless of whether such Connecticut bank owes a fiduciary duty to the person;

(9) "Club deposit" means deposits to be received at regular intervals, the whole amount deposited to be withdrawn by the owner or repaid by the bank in not more than fifteen months from the date of the first deposit, and upon which no interest or dividends need to be paid;

(10) "Commissioner" means the Banking Commissioner and, with respect to any function of the commissioner, includes any person authorized or designated by the commissioner to carry out that function;

(11) "Company" means any corporation, joint stock company, trust, association, partnership, limited partnership, unincorporated organization, limited liability company or similar organization, but does not include (A) any corporation the majority of the shares of which are owned by the United States or by any state, or (B) any trust which by its terms shall terminate within twenty-five years or not later than twenty-one years and ten months after the death of beneficiaries living on the effective date of the trust;

(12) "Connecticut bank" means a bank and trust company, savings bank or savings and loan association chartered or organized under the laws of this state;

(13) "Connecticut credit union" means a cooperative, nonprofit financial institution that (A) is organized under chapter 667 and the membership of which is limited as provided in section 36a-438a, (B) operates for the benefit and general welfare of its members with the earnings, benefits or services offered being distributed to or retained for its members, and (C) is governed by a volunteer board of directors elected by and from its membership;

(14) "Connecticut credit union service organization" means a credit union service organization that is incorporated under the laws of this state, located in this state and established by at least one Connecticut credit union;

(15) "Consolidation" means a combination of two or more institutions into a new institution; all institutions party to the consolidation, other than the new institution, are "constituent" institutions; the new institution is the "resulting" institution;

(16) "Control" has the meaning given to that term in 12 USC Section 1841(a), as from time to time amended;

(17) "Credit union service organization" means an entity organized under state or federal law to provide credit union service organization services primarily to its members, to Connecticut credit unions, federal credit unions and out-of-state credit unions other than its members, and to members of any such other credit unions;

(18) "Customer" means any person using a service offered by a financial institution;

(19) "Demand account" means an account into which demand deposits may be made;

(20) "Demand deposit" means a deposit that is payable on demand, a deposit issued with an original maturity or required notice period of less than seven days or a deposit representing funds for which the bank does not reserve the right to require at least seven days' written notice of the intended withdrawal, but does not include any time deposit;

(21) "Deposit" means funds deposited with a depository;

(22) "Deposit account" means an account into which deposits may be made;

(23) "Depositor" includes a member of a mutual savings and loan association;

(24) "Director" means a member of the governing board of a financial institution;

(25) "Equity capital" means the excess of a Connecticut bank's total assets over its total liabilities, as defined in the instructions of the federal Financial Institutions Examination Council for consolidated reports of condition and income;

(26) "Executive officer" means every officer of a Connecticut bank who participates or has authority to participate, otherwise than in the capacity of a director, in major policy-making functions of such bank, regardless of whether such officer has an official title or whether that title contains a designation of assistant and regardless of whether such officer is serving without salary or other compensation. The president, vice president, secretary and treasurer of such bank are deemed to be executive officers, unless, by resolution of the governing board or by such bank's bylaws, any such officer is excluded from participation in major policy-making functions, otherwise than in the capacity of a director of such bank, and such officer does not actually participate in such policy-making functions;

(27) "Federal agency" has the meaning given to that term in 12 USC Section 3101, as from time to time amended;

(28) "Federal bank" means a national banking association, federal savings bank or federal savings and loan association having its principal office in this state;

(29) "Federal branch" has the meaning given to that term in 12 USC Section 3101, as from time to time amended;

(30) "Federal credit union" means any institution chartered or organized as a federal credit union pursuant to the laws of the United States having its principal office in this state;

(31) "Fiduciary" means a person undertaking to act alone or jointly with others primarily for the benefit of another or others in all matters connected with its undertaking and includes a person acting in the capacity of trustee, executor, administrator, guardian, assignee, receiver, conservator, agent, custodian under the Connecticut Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act, and acting in any other similar capacity;

(32) "Financial institution" means any Connecticut bank, Connecticut credit union, or other person whose activities in this state are subject to the supervision of the commissioner, but does not include a person whose activities are subject to the supervision of the commissioner solely pursuant to chapter 672a, 672b or 672c or any combination thereof;

(33) "Foreign bank" has the meaning given to that term in 12 USC Section 3101, as from time to time amended;

(34) "Foreign country" means any country other than the United States and includes any colony, dependency or possession of any such country;

(35) "Governing board" means the group of persons vested with the management of the affairs of a financial institution irrespective of the name by which such group is designated;

(36) "Holding company" means a bank holding company or a savings and loan holding company, except, as used in sections 36a-180 to 36a-191, inclusive, "holding company" means a company that controls a bank;

(37) "Insured depository institution" has the meaning given to that term in 12 USC Section 1813, as from time to time amended;

(38) "Licensee" means any person who is licensed or required to be licensed pursuant to the applicable provisions of this title;

(39) "Loan" includes any line of credit or other extension of credit;

(40) "Merger" means the combination of one or more institutions with another which continues its corporate existence; all institutions party to the merger are "constituent" institutions; the merging institution which upon the merger continues its existence is the "resulting" institution;

(41) "Mutual" when used in conjunction with any institution that is a bank or out-of-state bank means any such institution without capital stock;

(42) "Mutual holding company" means a mutual holding company organized under sections 36a-192 to 36a-199, inclusive, and unless otherwise indicated, a subsidiary holding company controlled by a mutual holding company organized under sections 36a-192 to 36a-199, inclusive;

(43) "Out-of-state" includes any state other than Connecticut and any foreign country;

(44) "Out-of-state bank" means any institution that engages in the business of banking, but does not include a bank, Connecticut credit union, federal credit union or out-of-state credit union;

(45) "Out-of-state credit union" means any credit union other than a Connecticut credit union or a federal credit union;

(46) "Out-of-state trust company" means any company chartered to act as a fiduciary but does not include a company chartered under the laws of this state, a bank, an out-of-state bank, a Connecticut credit union, a federal credit union or an out-of-state credit union;

(47) "Person" means an individual, company, including a company described in subparagraphs (A) and (B) of subdivision (10) of this section, or any other legal entity, including a federal, state or municipal government or agency or any political subdivision thereof;

(48) "Point of sale terminal" means a device located in a commercial establishment at which sales transactions can be charged directly to the buyer's deposit, loan or credit account, but at which deposit transactions cannot be conducted;

(49) "Prepayment penalty" means any charge or penalty for paying all or part of the principal before the date on which the principal is due and includes computing a refund of unearned interest by a method that is less favorable to the borrower than the actuarial method, as defined by Section 933(d) of the Housing and Community Development Act of 1992, 15 USC 1615(d), as from time to time amended;

[(49)] (50) "Reorganized savings bank" means any savings bank incorporated and organized in accordance with sections 36a-192 and 36a-193;

[(50)] (51) "Reorganized savings and loan association" means any savings and loan association incorporated and organized in accordance with sections 36a-192 and 36a-193;

[(51)] (52) "Reorganized savings institution" means any reorganized savings bank or reorganized savings and loan association;

[(52)] (53) "Representative office" has the meaning given to that term in 12 USC Section 3101, as from time to time amended;

[(53)] (54) "Reserves for loan and lease losses" means the amounts reserved by a Connecticut bank against possible loan and lease losses as shown on the bank's consolidated reports of condition and income;

[(54)] (55) "Retail deposits" means any deposits made by individuals who are not "accredited investors", as defined in 17 CFR Section 230.501(a);

[(55)] (56) "Satellite device" means an automated teller machine which is not part of an office of the bank, Connecticut credit union or federal credit union which has established such machine;

[(56)] (57) "Savings account" means a deposit account, other than an escrow account established pursuant to section 49-2a, into which savings deposits may be made and which account must be evidenced by periodic statements delivered at least semiannually or by a passbook;

[(57)] (58) "Savings and loan association" means an institution chartered or organized under the laws of this state as a savings and loan association;

[(58)] (59) "Savings bank" means an institution chartered or organized under the laws of this state as a savings bank;

[(59)] (60) "Savings deposit" means any deposit other than a demand deposit or time deposit on which interest or a dividend is paid periodically;

[(60)] (61) "Savings and loan holding company" has the meaning given to that term in 12 USC Section 1467a, as from time to time amended;

[(61)] (62) "Share account holder" means a person who maintains a share account in a Connecticut credit union, federal credit union or out-of-state credit union that maintains in this state a branch, as defined in section 36a-435b;

[(62)] (63) "State" means any state of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the trust territory of the Pacific Islands, the Virgin Islands and the Northern Mariana Islands;

[(63)] (64) "State agency" has the meaning given to that term in 12 USC Section 3101, as from time to time amended;

[(64)] (65) "State branch" has the meaning given to that term in 12 USC Section 3101, as from time to time amended;

[(65)] (66) "Subsidiary" has the meaning given to that term in 12 USC Section 1841(d), as from time to time amended;

[(66)] (67) "Subsidiary holding company" means a stock holding company, controlled by a mutual holding company, that holds one hundred per cent of the stock of a reorganized savings institution;

[(67)] (68) "Supervisory agency" means: (A) The commissioner; (B) the Federal Deposit Insurance Corporation; (C) the Resolution Trust Corporation; (D) the Office of Thrift Supervision; (E) the National Credit Union Administration; (F) the Board of Governors of the Federal Reserve System; (G) the United States Comptroller of the Currency; and (H) any successor to any of the foregoing agencies or individuals;

[(68)] (69) "Time account" means an account into which time deposits may be made;

[(69)] (70) "Time deposit" means a deposit that the depositor or share account holder does not have a right and is not permitted to make withdrawals from within six days after the date of deposit, unless the deposit is subject to an early withdrawal penalty of at least seven days' simple interest on amounts withdrawn within the first six days after deposit, subject to those exceptions permissible under 12 CFR Part 204, as from time to time amended;

[(70)] (71) "Trust bank" means a Connecticut bank organized to function solely in a fiduciary capacity; and

[(71)] (72) "Uninsured bank" means a Connecticut bank that does not accept retail deposits and for which insurance of deposits by the Federal Deposit Insurance Corporation or its successor agency is not required.

Sec. 2. Subsection (b) of section 36a-261 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2005):

(b) (1) The assets of Connecticut banks may be invested in mortgage loans, subject to the general limitations set forth in this section.

(2) Any such mortgage loan shall be secured either by (A) a first mortgage which is a first lien or (B) a mortgage which is subordinate to another mortgage or other mortgages, provided, in the case of a loan secured by a mortgage which is subordinate to another mortgage or other mortgages, which other mortgage or mortgages are held by a person other than the Connecticut bank, the real estate securing such loan is (i) residential real estate, or (ii) nonresidential real estate provided the loan does not exceed, at the time of origination, a loan-to-value ratio of fifty per cent, or (iii) nonresidential real estate in a loan transaction which, at the time of origination, exceeds a loan-to-value ratio of fifty per cent, provided the aggregate amount of all such loans made pursuant to this subparagraph (B)(iii) does not exceed, at the time of origination, twenty-five per cent of the equity capital and reserves for loan and lease losses of the Connecticut bank. A loan which was included within the aggregate limit of subparagraph (B)(iii) of this subdivision subsequently may be excluded if the loan is repaid or if the applicable loan-to-value ratio is reduced to fifty per cent or below because of a reduction in principal or senior liens, additional contributions of real estate collateral, or an increase in equity value substantiated by a current suitable appraisal or evaluation. Except where the proceeds are being used to refinance an existing mortgage loan with the same lender or an affiliate of such lender, a mortgage loan may provide for or include a prepayment penalty, including a refund calculated according to the rule of 78s, as such term is used in 12 CFR 226.32, as from time to time amended, if such penalty can be exercised only for the first three years following consummation of the loan. No prepayment penalty shall exceed 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 not later than three years after consummation of the loan. If the proceeds of the mortgage loan are used to refinance an existing mortgage loan, the new mortgage loan shall provide a benefit to the borrower considering all of the circumstances, including the terms of both the new and refinanced loans, the costs of the new loan and the borrower's circumstances. Each mortgage loan shall require the approval of the borrower to change the payment due date from the due date specified in the note evidencing the mortgage loan.

Sec. 3. Subsection (f) of section 36a-457b of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2005):

(f) A mortgage loan made by a Connecticut credit union shall require repayment of principal and payment of interest in at least consecutive semiannual installments of principal and interest, such payments to be sufficient to pay the loan in full not later than forty-two years from the date of the first payment and the first payment to be made within twenty-four months from the date of the note. The requirements for semiannual principal payments pursuant to this subsection are not applicable to: (1) Consumer revolving loan agreements made pursuant to subsection (c) of section 49-2, (2) alternative mortgage loans made pursuant to section 36a-265, (3) loans that may be demanded at any time and that are secured by residential real estate, and (4) any other loan or class of loans determined by the commissioner not to be subject to such requirements. Except where the proceeds are being used to refinance an existing mortgage loan with the same lender or an affiliate of such lender, a mortgage loan made by a Connecticut credit union may provide for or include a prepayment penalty, including a refund calculated according to the rule of 78s, as such term is used in 12 CFR 226.32, as from time to time amended, if such penalty can be exercised only for the first three years following consummation of the loan. No prepayment penalty shall exceed 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 not later than three years after consummation of the loan. If the proceeds of the mortgage loan are used to refinance an existing mortgage loan, the new mortgage loan shall provide a benefit to the borrower considering all of the circumstances, including the terms of both the new and refinanced loans, the costs of the new loan and the borrower's circumstances. Each such mortgage loan shall require the approval of the borrower to change the payment due date from the due date specified in the note evidencing the mortgage loan.

Sec. 4. Section 36a-498a of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2005):

No licensee under section 36a-489 and no person exempt from licensure under subdivisions (1), (5) and (6) of section 36a-487 making a first mortgage loan shall 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. Except where the proceeds are being used to refinance an existing mortgage loan with the same lender or an affiliate of such lender, a first mortgage loan may provide for or include a prepayment penalty, including a refund calculated according to the rule of 78s, as such term is used in 12 CFR 226.32, as from time to time amended, if such penalty can be exercised only for the first three years following consummation of the loan. No prepayment penalty shall exceed 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 not later than three years after consummation of the loan. If the proceeds of the mortgage loan are used to refinance an existing mortgage loan, the new mortgage loan shall provide a benefit to the borrower considering all of the circumstances, including the terms of both the new and refinanced loans, the costs of the new loan and the borrower's circumstances. Each such mortgage loan shall require the approval of the borrower to change the payment due date from the due date specified in the note evidencing the mortgage loan. For purposes of this section, "additional proceeds" has the meaning given to that term in subdivision (3) of section 36a-746e and "prepaid finance charge" has the meaning given to that term in subdivision (7) of section 36a-746a.

Sec. 5. Section 36a-519 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2005):

(a) In any transaction subject to part III of chapter 669 and except as permitted in subsection (b) of this section, no mortgage lender licensee shall impose any charge as a penalty for the prepayment of principal of a secondary mortgage loan. [which exceeds five per cent of the balance prepaid, provided no penalty shall be imposed for any prepayment occurring more than three years after the date of such loan.]

(b) Except where the proceeds are being used to refinance an existing mortgage loan with the same lender or an affiliate of such lender, a secondary mortgage loan may provide for or include a prepayment penalty, including a refund calculated according to the rule of 78s, as such term is used in 12 CFR 226.32, as from time to time amended, if such penalty can be exercised only for the first three years following consummation of the loan. No prepayment penalty shall exceed 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 not later than three years after consummation of the loan. If the proceeds of the mortgage loan are used to refinance an existing mortgage loan, the new mortgage loan shall provide a benefit to the borrower considering all of the circumstances, including the terms of both the new and refinanced loans, the costs of the new loan and the borrower's circumstances. Each such mortgage loan shall require the approval of the borrower to change the payment due date from the due date specified in the note evidencing the mortgage loan.

Sec. 6. Section 36a-746a of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2005):

As used in this section and sections 36a-746b to 36a-746g, inclusive, as amended by this act:

(1) "APR" means the annual percentage rate for the loan calculated according to the provisions of the federal Truth-in-Lending Act, 15 USC Section 1601 et seq., as from time to time amended, and the regulations promulgated thereunder. For open-end lines of credit, "APR" means the highest corresponding annual percentage rate required to be disclosed under 12 CFR Sections 226.6(a)(2) and 226.14(b), as from time to time amended, excluding any maximum rates required to be disclosed or stated pursuant to 12 CFR Sections 226.6(a)(2) or 226.30, as from time to time amended. For closed-end loans, "APR" means the annual percentage rate required to be disclosed under 12 CFR Section 226.18(e), as from time to time amended, excluding any maximum rates required to be disclosed or stated pursuant to 12 CFR Sections 226.18(f) or 226.30, as from time to time amended. For purposes of this subdivision, any variable rate calculation shall use an index value in effect within forty-five days prior to consummation;

(2) "Broker" means a person who, for a fee, commission or other valuable consideration, negotiates, solicits, arranges, places or finds a high cost home loan that is to be made by a lender;

(3) "Consummation" means the time that a borrower becomes contractually obligated on a loan or extension of credit;

(4) "High cost home loan" means any loan or extension of credit, including an open-end line of credit but excluding a reverse mortgage transaction, as defined in 12 CFR Section 226.33, as from time to time amended:

(A) In which the borrower is a natural person;

(B) The proceeds of which are to be used primarily for personal, family or household purposes;

(C) In which the loan is secured by a mortgage upon any interest in one-to-four family residential real property located in this state which is, or, when the loan is made, is intended to be occupied by the borrower as a principal residence; and

(D) In which the APR at consummation will exceed the yield on Treasury securities having comparable periods of maturity to the loan maturity as of the fifteenth day of the month immediately preceding the month in which the application for the loan or extension of credit is received by the lender, by more than the number of percentage points specified in 12 CFR 226.32(a)(1)(i), as from time to time amended;

(5) "Interim interest" means interest for the period from funding to the start of amortization paid by a borrower at or before consummation of a closed-end loan where such amortization begins sixty-two days or less after funding;

(6) "Lender" means any person who originates one or more high cost home loans;

(7) "Prepaid finance charge" means any finance charge determined in accordance with 12 CFR Section 226.4, as from time to time amended, that is paid separately in cash or by check before or at consummation of a loan or extension of credit or withheld from the proceeds of such transaction at any time, except the term includes any fees or commissions payable to the lender or broker in connection with the sale of credit life, accident, health, disability or unemployment insurance products or unrelated goods or services sold in conjunction with the loan or extension of credit when the cost of such insurance products or goods or services is prepaid with the proceeds of the loan or extension of credit and financed as part of the principal amount of the loan or extension of credit, and excludes premiums, fees and any other amounts paid to a governmental agency, any amounts required to be escrowed by a governmental agency and interim interest. [;]

[(8) "Prepayment penalty" means any charge or penalty for paying all or part of the principal before the date on which the principal is due and includes computing a refund of unearned interest by a method that is less favorable to the borrower than the actuarial method, as defined by Section 933(d) of the Housing and Community Development Act of 1992, 15 USC 1615(d), as from time to time amended.]

Sec. 7. Section 36a-746c of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2005):

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 from time to time amended, 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 from time to time amended, for rebates of interest arising from a loan acceleration due to default;

(6) A prepayment penalty except as allowed by this subdivision. A high cost home loan may provide for or include a prepayment penalty, including a refund calculated according to the rule of 78s, as such term is used in 12 CFR 226.32, as from time to time amended, if:

(A) The penalty can be exercised only for the first three years following consummation. No prepayment penalty shall exceed 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 between two and three years after consummation of the loan;

(B) The source of the prepayment funds is not a refinancing by the lender or an affiliate of the lender; and

(C) At consummation, the borrower's total monthly debts, including amounts owed under the high cost home loan, do not exceed fifty per cent of the borrower's monthly gross income, as verified by the borrower's signed financial statement, a credit report and payment records for employment income;

(7) A mandatory arbitration clause or a waiver of participation in a class action; [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; or

(9) A provision that permits the lender to change the payment due date from the due date specified in the note evidencing the mortgage loan without the written consent of the borrower.

Sec. 8. of the general statutes is amended by adding subsection (o) as follows (Effective October 1, 2005):

(NEW) (o) In the case of a mortgage loan where the borrower has the right to rescind under the Consumer Credit Protection Act (15 USC 1635), the lender shall provide, at the time of the signing of the mortgage loan application by the borrower, written notice to the borrower, substantially similar to the following: "You have a three-day right to rescind this agreement. If you are thinking about whether this agreement is appropriate for you, you may wish to contact a 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) insert the definition of "prepayment penalty" from section 36a-746a of the general statutes into section 36a-2 of the general statutes; (2) apply the same prepayment penalties limitation currently in high cost mortgages to all mortgages in the state whereby prepayment penalties cannot exceed three per cent of the principal paid off during the first year, two per cent during the second year and one per cent during the third year. Unscrupulous lenders are avoiding the high cost loan limitation on prepayment penalties by restructuring the mortgage to avoid the definition of high cost loan; (3) prohibit prepayment penalties when the mortgagee is refinancing a mortgage with the same lender or affiliate of such lender; (4) require that all refinancing of existing mortgages have some benefit to the borrower applying the current language in the high cost mortgage statute, section 36a-746e(8) of the general statutes; (5) require the borrower's written consent to change the payment due date on a mortgage loan; and (6) require lenders whose loans are subject to the Truth in Lending Act to notify the borrower that they may wish to contact a housing counselor to determine whether to cancel the loan within the three-day rescission period. The notice refers the borrower to the United States Department of Housing and Urban Development for further information.

[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.]