AN ACT CONCERNING MORTGAGE PRACTICES AND LICENSING PROCEDURES.

1. makes several changes regarding material misstatements in mortgage originator's registration applications;

2. sets a time-frame for originators and first and secondary mortgage lender and broker applicants and licensees to provide notification of changes to information provided in their application;

3. changes the originator registration fee schedule;

4. prohibits first mortgage lenders and brokers from imposing a fee on borrowers for failing to close on a loan and prohibits brokers from imposing a fee for the prepayment of a loan;

5. expands the group of lenders prohibited from making excessive prepaid finance charges.

An applicant for a first or second (1) mortgage lender, (2) mortgage correspondent lender, or (3) mortgage broker license must submit an application for registration for each of his originators or prospective originators. The bill makes it a general violation of the banking laws if any of these licensees files an originator registration application knowing that it contains a material misstatement. Under the bill an applicant's material misstatement in an originator registration application is a basis for denial of these licenses.

The bill also clarifies that a material misstatement is a basis for denial of an originator's registration application if the originator or other applicant makes a material misstatement in it. Current law only addresses such action by the applicant. The bill also makes an originator's violation of any banking laws or any other laws applicable to the conduct of his business, the basis for revocation, suspension, or refusal to renew his registration.

The bill requires a first or second (1) mortgage lender, (2) mortgage correspondent lender, or (3) mortgage broker licensee to notify the commissioner of any changes in its application within 30 business days of the change, rather than promptly as required under current law. It also requires originators to notify, in writing, the licensee they work with of any changes to the information in their originator registration application within 30 business days of the change. The bill specifies that this information must be provided in both cases when there are changes to the initial application or most recent renewal application.

Under current law, first or second (1) mortgage lenders, (2) mortgage correspondent lenders, or (3) mortgage broker licensees are licensed for a two-year period. The registration fee for originators associated with these licensees is $ 50 for a registration period of up to a year and $ 100 for a period between one and two years. The bill makes the fee $ 100 regardless of when the licensee makes the originator registration application.

The bill prohibits first and second mortgage lenders and brokers from requiring, by agreement or otherwise, a borrower to compensate them for any fees, commissions, or other valuable consideration lost because the borrower did not close on a loan. The ban does not apply to advance fees collected in accordance with the law.

The bill also prohibits brokers from imposing any fee, commission, or valuable consideration on a borrower who prepays his loan principal.

The law generally prohibits the following groups form charging prepaid finance charges that exceed, in the aggregate, the greater of 5% or $ 2000 on a first mortgage loan:

1. first mortgage lenders, correspondent lenders, and brokers;

2. banks, out-of-state banks, Connecticut credit unions, federal credit unions, or out-of-state credit unions;

3. small loan lenders; and

4. secondary mortgage lenders, correspondent lenders, and brokers.

The bill expands the restrictions on prepaid finance charges to apply to persons making five or fewer first mortgage loans within any period of 12 consecutive months.

An originator is an individual employed or retained by a first or second mortgage lender or broker to negotiate, solicit, arrange or find a first or second mortgage loan for, or with the expectation of, a fee, commission, or other valuable consideration.

Yea

Nay

(03/09/2006)