AN ACT CONCERNING RESPONSIBLE LENDING AND ECONOMIC SECURITY.

Substitute House Bill No. 5577

Public Act No. 08-176

AN ACT CONCERNING RESPONSIBLE LENDING AND ECONOMIC SECURITY.

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

Section 1. (NEW) (Effective from passage) (a) As used in this section, "authority" means the Connecticut Housing Finance Authority created under section 8-244 of the general statutes.

(b) The authority is authorized to continue to develop and implement a program for home mortgage refinancing for homeowners with adjustable rate mortgages as an additional purpose pursuant to the provisions of subdivision (32) of section 8-250 of the general statutes. Such program shall be undertaken by the authority consistent with and subject to its contractual obligations to its bondholders in an initial amount of forty million dollars under terms and conditions determined by the authority.

Sec. 2. (NEW) (Effective from passage) (a) As used in this section:

(1) "Authority" means the Connecticut Housing Finance Authority created under section 8-244 of the general statutes;

(2) "Mortgage" means a mortgage deed or other instrument which constitutes a first or second consensual lien on one-to-four family owner-occupied residential real property located in this state, including, but not limited to, a single-family unit in a common interest community, securing a loan made primarily for personal, family or household purposes;

(3) "Borrower" means the owner-occupant of a one-to-four family residential real property located in this state, including, but not limited to, a single family unit in a common interest community, who has a mortgage encumbering such real property;

(4) "Lender" means the original lender under a mortgage, or its agents, successors or assigns; and

(5) "HERO program" means the Homeowner's Equity Recovery Opportunity Loan program.

(b) The authority is authorized to develop and implement the HERO program as an additional purpose pursuant to the provisions of subdivision (32) of section 8-250 of the general statutes. The HERO program shall be undertaken by the authority consistent with and subject to its contractual obligations with its bondholders in an initial amount of thirty million dollars.

(c) On and after July 1, 2008, the authority shall implement the HERO program in accordance with this section. Said program shall offer, within available funds, financing through the following mechanism: The authority shall purchase mortgages directly from lenders and then place borrowers it determines to be eligible on an affordable repayment plan. All borrowers approved by the authority for the program shall attend in-person financial counseling at an authority-approved agency.

(d) A HERO loan shall: (1) Be a mortgage for up to thirty years in an amount determined by the authority; (2) provide an interest rate at an amount determined by the authority; (3) be serviced by the authority or its agents; and (4) have property taxes and insurance, including mortgage insurance, homeowner's insurance and, if applicable, flood insurance, included in the borrower's monthly payment amount.

(e) For purposes of the HERO program, the authority shall purchase mortgages directly from lenders and make a HERO loan available to borrowers whose mortgages have been purchased by the authority and who have been determined by the authority to be eligible. A borrower shall be eligible if the HERO loan is in the first lien position, and if, in the authority's determination, the borrower has: (1) Made an effort to meet his or her financial obligations to the best of the borrower's ability; (2) sufficient and stable income to support timely repayment of a HERO loan; (3) legal title to the mortgaged property and resides in it as the borrower's permanent residence; and (4) if the borrower has stopped making monthly payments, the ability to account for the borrower's cash flow by showing how those funds were escrowed, saved or redirected. The authority shall make a determination of eligibility for the HERO program no later than thirty calendar days after the date of receipt of the borrower's application.

(f) The borrower shall apply for a HERO loan on the form provided by the authority. The borrower shall complete and sign the application subject to the penalty for false statement under section 53a-157b of the general statutes. Any borrower who misrepresents any financial or other pertinent information in conjunction with the filing of an application for a HERO loan may be denied assistance. The borrower shall provide the authority with full disclosure of all assets and liabilities, whether singly or jointly held, and all household income regardless of source. For purposes of this subsection, both of the following are included as assets:

(1) The sum of the household's savings and checking accounts, market value of stocks, bonds and other securities, other capital investments, pensions and retirement funds, personal property and equity in real property including the subject mortgage property. Income derived from family assets shall be considered as income. Equity is the difference between the market value of the property and the total outstanding principal of any loans secured by the property and other liens.

(2) Lump-sum additions to family assets such as inheritances, capital gains, insurance payments included under health, accident, hazard or worker's compensation policies and settlements, verdicts or awards for personal or property losses or transfer of assets without consideration within one year of the time of application. Pending claims for such items must be identified by the borrower as contingent assets.

(g) On or before July 1, 2008, the authority shall adopt procedures in accordance with section 1-121 of the general statutes to implement the provisions of this section.

Sec. 3. Subsection (a) of section 8-251 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2008):

(a) In order to provide additional construction and permanent financing for housing in this state, the authority is authorized to make commitments to purchase, and to purchase, service and sell mortgages and to make loans directly upon the security of any mortgage, and to make commitments to purchase, and to purchase and sell participation sale certificates representing interests in mortgages, provided the underlying mortgage loans shall have been made and shall be used solely to finance or refinance the construction, rehabilitation, purchase or leasing of housing in this state, and provided further the aggregate amount of permanent mortgages, mortgage-backed securities and participation sale certificates representing interests in mortgages purchased, and permanent loans made by the authority which are not directly or indirectly insured or guaranteed by any department, agency, instrumentality of the United States of America, or public corporation chartered by the Congress of the United States, including but not limited to the Federal Home Loan Mortgage Corporation, or which are not insured or guaranteed by any department, agency or instrumentality of the state, any insurance company licensed to do business in the state and authorized to underwrite mortgage insurance or by the authority shall not at any one time exceed one billion five hundred million dollars.

Sec. 4. Section 8-250 of the general statutes is amended by adding subdivision (45) as follows (Effective July 1, 2008):

(NEW) (45) To develop and implement a program to purchase, and to fund the authority's purchase of, foreclosed residential real property in this state for the purpose of providing affordable and supportive housing, and to report, in accordance with section 11-4a, no later than January 1, 2009, on the program and plans for its implementation to the joint standing committees of the General Assembly having cognizance of matters relating to banks and planning and development, and to the select committee of the General Assembly having cognizance of matters relating to housing.

Sec. 5. Section 8-265cc of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2008):

As used in sections 8-265cc to 8-265kk, inclusive, as amended by this act:

(1) "Aggregate family income" means the total income of persons residing in the same household as the mortgagor and any other resident of the household declared by the mortgagor as a dependent for federal tax purposes, from whatever source derived, including, but not limited to, pensions, annuities, retirement benefits and Social Security benefits, provided the authority may exclude from income (A) reasonable allowances for dependents, (B) reasonable allowances for medical expenses, (C) all or any part of the earnings of gainfully employed minors or family members other than the chief wage earner, (D) income not regularly received, and (E) such other expenses as the authority may allow;

(2) "Authority" means the Connecticut Housing Finance Authority [as] created under section 8-244;

(3) "Mortgage" means a mortgage deed or other instrument which constitutes a first or second consensual lien on [one or two-family] one-to-four family owner-occupied residential real property located in this state, including, but not limited to, a single-family [units] unit in a common interest community; [, located in this state; ]

(4) "Mortgagee" means the original lender under a mortgage, or its agents, successors, [who agrees to participate in the program established pursuant to sections 8-265cc to 8-265kk, inclusive, or an assignee of a mortgage who agrees to participate in the program] or assigns;

(5) "Mortgagor" means the owner-occupant of [one or two-family] a one-to-four family residential real property located in this state, including, but not limited to, a single family unit in a common interest community, who is also the borrower under a mortgage encumbering such real property;

(6) "Housing expense" means the sum of the mortgagor's monthly maintenance expense in a common interest community, utility expense, heating expense, hazard insurance payment, taxes and required mortgage payment, including escrows;

(7) "Financial hardship due to circumstances beyond the mortgagor's control" means: [a] (A) A significant [curtailment] reduction of at least twenty-five per cent of aggregate family household income which reasonably cannot be or could not have been alleviated by the liquidation of assets by the mortgagor, [and is related to one or more of the following: (A) Unemployment] including, but not limited to, a reduction resulting from (i) unemployment or underemployment of one or more of the mortgagors; [(B)] (ii) a loss, reduction or delay in receipt of such federal, state or municipal benefits as Social Security, supplemental security income, public assistance and government pensions; [(C)] (iii) a loss, reduction or delay in receipt of such private benefits as pension, disability, annuity or retirement benefits; [(D)] (iv) divorce or a loss of support payments; [(E)] (v) disability, illness or death of a mortgagor; [(F)] (vi) uninsured damage to the mortgaged property which affects liveability and necessitates costly repairs; or [(G)] (vii) expenses related to the disability, illness or death of a member of the mortgagor's family, but is not related to accumulation of installment debt incurred for recreational or nonessential items prior to the occurrence of the alleged circumstances beyond the mortgagor's control in an amount that would have caused the mortgagor's total debt service to exceed sixty per cent of aggregate family income at that time; or (B) a significant increase in the dollar amount of the periodic payments required by the mortgage;

(8) "Consumer credit counseling agency" means a nonprofit corporation or governmental agency located in this state which has been designated by the authority to provide homeowners' emergency mortgage assistance program counseling. A qualified consumer credit counseling agency must either be certified as a housing counseling agency by the federal Department of Housing and Urban Development or otherwise determined accepted by the authority;

(9) "Foreclosure mediation program" means the foreclosure mediation program established by section 17 of this act; and

(10) "Periodic payments" means principal, interest, taxes, insurance and, if applicable, condominium fees.

Sec. 6. Subsection (b) of section 8-265dd of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2008):

(b) Notwithstanding any provision of the general statutes, or any rule of law to the contrary, on and after [the date a mortgagee agrees to participation in the program established pursuant to sections 8-265cc to 8-265kk, inclusive] July 1, 2008, no judgment of strict foreclosure nor any judgment ordering a foreclosure sale shall be entered in any action instituted by the mortgagee to foreclose a mortgage commenced on or after such date, for the foreclosure of an eligible mortgage unless (1) notice to the mortgagor has been given by the mortgagee in accordance with section 8-265ee, as amended by this act, and the time for response has expired, and (2) a determination has been made on the mortgagor's application for emergency mortgage assistance payments in accordance with section 8-265ff, as amended by this act, or the applicable time periods set forth in [said] sections 8-265cc to 8-265kk, inclusive, as amended by this act, have expired, whichever is earlier. For purposes of this section and sections 8-265ee to 8-265kk, inclusive, as amended by this act, an "eligible mortgage" is a mortgage which satisfies the standards contained in subdivisions (1), (3), (8) and (10) to (13), inclusive, of subsection (d) of section 8-265ff, as amended by this act.

Sec. 7. Section 8-265ee of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2008):

(a) On [or after the date a mortgagee files an agreement to participate in the program established pursuant to sections 8-265cc to 8-265kk, inclusive, the] and after July 1, 2008, a mortgagee who desires to foreclose upon a mortgage which satisfies the standards contained in subdivisions (1), (3), (10), (11) and (12) of subsection (d) of section 8-265ff, as amended by this act, shall give notice to the mortgagor by registered, or certified mail, postage prepaid at the address of the property which is secured by the mortgage. No such mortgagee may commence a foreclosure of a mortgage prior to mailing such notice. Such notice shall advise the mortgagor of his delinquency or other default under the mortgage and shall state that the mortgagor has [thirty] sixty days from the date of such notice in which to (1) have a face-to-face meeting, [or] telephone or other conference acceptable to the authority with the mortgagee or a face-to-face meeting with a consumer credit counseling agency to attempt to resolve the delinquency or default by restructuring the loan payment schedule or otherwise, and (2) [to] contact the authority, at an address and phone number contained in the notice, to obtain information and apply for emergency mortgage assistance payments if the mortgagor and mortgagee are unable to resolve the delinquency or default.

(b) If the mortgagor fails to meet with the mortgagee or comply with any of the time limitations specified in the notice as provided in subsection (a) of this section, or if the mortgagor's application is not filed [within] by the date thirty days after the date of any default in payment under an agreement as provided in subsection (c) of this section or if the mortgagor's application for emergency mortgage assistance payments is not approved [within] by the date thirty calendar days [of] after the date of receipt of the mortgagor's application in accordance with the provisions of section 8-265ff, as amended by this act, the foreclosure of the mortgagor's mortgage may, at any time thereafter, continue without any further restriction or requirement under the provisions of sections 8-265cc to 8-265kk, inclusive, as amended by this act, provided the mortgagee files an affidavit with the court stating the notice provisions of subsection (a) of this section have been complied with and that either the mortgagor failed to meet with the mortgagee or failed to comply with all of the time limitations specified in the notice as provided in subsection (a) of this section or that the mortgagor's application for emergency assistance payments was not approved [within] by the date thirty calendar days [of] after the date of receipt of the mortgagor's application, or that a determination of ineligibility was made.

(c) If, after a face-to-face meeting, [or] telephone or other conference acceptable to the authority, as provided in subsection (a) of this section, the mortgagor and the mortgagee reach an agreement to resolve the delinquency or default and, because of financial hardship due to circumstances beyond the mortgagor's control, the mortgagor is unable to fulfill the obligations of the agreement, the mortgagor may apply to the authority for emergency mortgage assistance payments under sections 8-265cc to 8-265kk, inclusive, [within] as amended by this act, by the date thirty days [of] after the date of any default in payment under the agreement. The mortgagee shall not be required to send any additional notice to the mortgagor other than the notice required under subsection (a) of this section.

(d) No person receiving financial relief under sections 8-265cc to 8-265kk, inclusive, as amended by this act, may file a defense, counterclaim or set-off to any action for foreclosure of the mortgage for which such financial relief was provided.

(e) Nothing in sections 8-265cc to 8-265kk, inclusive, as amended by this act, shall prevent a mortgagor from exercising rights that may exist under the foreclosure mediation program and those rights may be exercised concurrently with the rights afforded under sections 8-265cc to 8-265kk, inclusive, as amended by this act, provided the exercise of rights under the foreclosure mediation program shall not cause a delay in the determination under subsection (d) of section 8-265ff, as amended by this act.

Sec. 8. Section 8-265ff of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2008):

(a) If the mortgagor applies for emergency mortgage assistance payments under sections 8-265cc to 8-265kk, inclusive, as amended by this act, the authority shall, [within] no later than eight business days after the date of receipt of such application, notify all of the mortgagees listed on the application holding a mortgage on the mortgagor's real property.

(b) The mortgagor shall apply for a loan on the form provided by the authority. The mortgagor shall complete and sign the application subject to the penalty for false statement under section 53a-157b.

(c) The mortgagor shall provide the authority with full disclosure of all assets and liabilities, whether singly or jointly held, and all household income regardless of source. For purposes of this subsection, both of the following are included as assets:

(d) The authority shall make a determination of eligibility for emergency mortgage assistance payments [within] by the date thirty calendar days after the date of receipt of the mortgagor's application. During said thirty-day period no judgment of strict foreclosure or any judgment ordering foreclosure by sale shall be entered in any action for the foreclosure of any mortgage any mortgagee holds on the mortgagor's real property. No emergency mortgage assistance payments may be provided unless the authority finds that:

(1) The real property securing the mortgage is a [single family or two-family] one-to-four family owner-occupied residence, including, but not limited to, a single family [units] unit in a common interest community, is the principal residence of the mortgagor and is located in this state;

(2) Payments, including amounts required to be paid into escrow or impound accounts as reserves for taxes and insurance payments, including mortgage insurance, or any combination of [the above] such payments, owed by the mortgagor under any mortgage on such real property have been contractually delinquent and the mortgagee has indicated to the mortgagor its intention to foreclose;

(3) The mortgage is not insured by the Federal Housing Administration under Title II of the National Housing Act, 12 USC Section 1707 et seq. ;

(4) The mortgagor is a resident of this state and is suffering financial hardship which renders the mortgagor unable to correct the delinquency or delinquencies within a reasonable time and make full mortgage payments. For the purposes of subdivision (8) of this subsection, in order to determine whether the financial hardship is due to circumstances beyond the mortgagor's control, the authority may consider information regarding the mortgagor's employment, credit history and current and past household income, assets, total debt service, net worth, eligibility for other types of assistance and any other criteria or related factors it deems necessary and relevant;

(5) There is a reasonable prospect that the mortgagor will be able to resume full mortgage payments within [thirty-six] sixty months after the beginning of the period in which emergency mortgage assistance payments are provided in accordance with a written plan formulated or approved by the authority and pay the mortgage in full in level monthly payments of principal and interest, subject only to payment changes as provided in the mortgage, by its maturity date;

(6) The mortgagor has applied to the authority for emergency mortgage assistance payments on an application form prescribed by the authority which includes a financial statement disclosing all assets and liabilities of the mortgagor, whether singly or jointly held, and all household income regardless of source;

(7) Based on the financial statement, the mortgagor has insufficient household income or net worth to correct the delinquency or delinquencies within a reasonable period of time and make full mortgage payments;

(8) There is a reasonable prospect that the mortgagor, as determined by the authority, will be able to repay the emergency mortgage assistance within a reasonable amount of time under the terms of section 8-265hh, as amended by this act, including through a refinancing of the mortgage, and the authority finds that, except for the current delinquency, the mortgagor has had a favorable residential mortgage credit history for the previous [five] two years or period of ownership, whichever is less. For the purposes of this subdivision, if a mortgagor has been more than thirty days in arrears [two] four or more times on a residential mortgage within the previous [two years] year, the mortgagor shall be ineligible for emergency mortgage assistance payments unless the mortgagor can demonstrate that the prior delinquency was the result of financial hardship due to circumstances beyond the mortgagor's control. In making a determination under this subsection, the authority may consider information regarding the structure of the mortgage, its repayment schedule and any other relevant factors or criteria it deems appropriate;

(9) The mortgagee is not otherwise prevented by law from foreclosing upon the mortgage;

(10) The mortgagor has not mortgaged the real property for commercial or business purposes;

(11) The mortgagor has not previously received emergency mortgage assistance payments from the authority, provided a mortgagor who has previously received such payments shall be eligible to reapply if the mortgagor has reinstated the mortgage and the mortgagor shall not have been delinquent for at least six consecutive months immediately following such reinstatement;

(12) The mortgagor is not in default under the mortgage except for the monetary delinquency referred to in subdivision (2) of this subsection; and

(13) The mortgagor meets such other procedural requirements as the authority may establish.

Sec. 9. Section 8-265gg of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2008):

(a) If the authority approves a mortgagor for assistance under the provisions of section 8-265ff, as amended by this act, the authority shall make monthly emergency mortgage assistance payments directly to each mortgagee secured by the mortgagor's real property for a period not to exceed [thirty-six] sixty months, either consecutively or nonconsecutively. The total monthly payment made by the authority, to or on behalf of a mortgagor under subsection (c) of this section, shall be not more than twenty-eight per cent of one hundred forty per cent of annual area median income, as published by the United States Department of Housing and Urban Development, divided by twelve. Upon receipt of payment in full from a mortgagor of the monthly amount established under subsection (b) of this section, the authority shall pay to each mortgagee the full amount then due to the mortgagee pursuant to the terms of the mortgage without regard to any acceleration under the mortgage. Such payments shall include, but not be limited to, principal, interest, taxes, assessments and insurance premiums. The initial payment made by the authority to each mortgagee [shall] may be an amount which pays all arrearages and pays reasonable costs and reasonable attorney's fees incurred by the mortgagee in connection with foreclosure of the mortgage.

(b) A mortgagor on whose behalf the authority is making emergency mortgage assistance payments shall, during the period in which such assistance is provided, make monthly payments to the authority in lieu of the mortgagor's monthly mortgage payments. Such payments to the authority shall be in an amount which will cause the mortgagor's total housing expense to be less than or equal to thirty-five per cent of the mortgagor's aggregate family income. The mortgagor shall make such payments to the authority not later than seven days before each mortgage payment is due to the mortgagee.

(c) The amount by which the emergency mortgage assistance payments made by the authority to the mortgagee exceeds the payments made by the mortgagor to the authority shall be a loan in that amount made by the authority to the mortgagor. Any such loan shall be evidenced by such documents as the authority may require and shall be subject to repayment with interest and secured as provided in section 8-265hh, as amended by this act.

(d) The authority shall establish procedures for periodic review of the mortgagor's financial circumstances for the purpose of determining the necessity for continuation, termination or adjustment of the amount of emergency mortgage assistance payments or adjustment of the payments by the mortgagor pursuant to subsection (b) of this section. Payments shall be discontinued when the authority determines that, due to changes in the mortgagor's financial condition, the payments are no longer necessary in accordance with the standards contained in section 8-265ff, as amended by this act, or the expiration of the [thirty-six-month] sixty-month period of a mortgagor eligibility for such payments under subsection (d) of section 8-265ff, as amended by this act, whichever is sooner, and a foreclosure of the mortgagor's mortgage may, at any time thereafter, proceed without further restriction or requirement under sections 8-265cc to 8-265hh, inclusive, as amended by this act. The authority may adjust payments by the mortgagor pursuant to subsection (b) of this section based on a review under this subsection.

(e) If the mortgagor fails to pay to the authority any amounts due under subsection (b) of this section within seven days of the date due to the authority, the authority shall review the mortgagor's financial circumstances to determine whether the delinquency is the result of additional financial hardship due to circumstances beyond the mortgagor's control. If the delinquency is not the result of additional financial hardship due to circumstances beyond the mortgagor's control in the mortgagor's financial circumstances, the authority shall terminate emergency mortgage assistance payments and the foreclosure of the mortgagor's mortgage may, at anytime thereafter, continue without any further restriction or requirement under sections 8-265cc to 8-265kk, inclusive, as amended by this act. If the delinquency is the result of a change in the mortgagor's financial circumstances, the authority may modify the mortgagor's required monthly payments to the authority.

(f) If any mortgagee scheduled to receive payments from the authority under the provisions of sections 8-265cc to 8-265kk, inclusive, as amended by this act, fails to receive the full amount of such payment from the authority within thirty days of the scheduled due date, or if the mortgagor fails to observe and perform all of the terms, covenants and conditions of the mortgage, the mortgagee shall provide a fifteen-day notice to the authority and the foreclosure of the mortgagor's mortgage may, at any time thereafter, proceed without any further restriction or requirement under sections 8-265cc to 8-265kk, inclusive, as amended by this act.

Sec. 10. Subsection (d) of section 8-265hh of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2008):

(d) All moneys received by the authority from mortgagors for repayment of emergency mortgage assistance payments shall be paid to the authority, deposited in such funds or accounts as the authority may establish from time to time for such purpose and [paid by the authority to the State Treasurer and deposited into the General Fund] be used solely for the purposes of the program established pursuant to sections 8-265cc to 8-265kk, inclusive, as amended by this act.

Sec. 11. (NEW) (Effective from passage) (a) For purposes of this section "state assistance" means a payment by the state of actual debt service, comprised of principal, interest, interest rate swap payments, liquidity fees, letter of credit fees, trustee fees and other similar bond-related expenses.

(b) Not later than July 1, 2008, the state, acting by and through the Secretary of the Office of Policy and Management and the State Treasurer, shall enter into a contract or contracts with the Connecticut Housing Finance Authority that provide for the state to pay to said authority state assistance on bonds issued by said authority for purposes of providing funds for the emergency mortgage assistance program in sections 8-265cc to 8-265kk, inclusive, of the general statutes, as amended by this act, as an additional purpose pursuant to the provisions of section 8-252 of the general statutes and costs of issuance in an aggregate principal amount not to exceed fifty million dollars. Any provision of such a contract entered into providing for payments equal to annual debt service shall constitute a full faith and credit obligation of the state and as part of the contract of the state with the holders of any bonds or refunding bonds, as applicable, appropriation of all amounts necessary to meet punctually the terms of such contract shall be made and the State Treasurer shall pay such amounts as the same become due. The Connecticut Housing Finance Authority may pledge such state assistance as security for the payment of such bonds or refunding bonds issued by said authority for such purposes. Any bonds so issued by the Connecticut Housing Finance Authority for the emergency mortgage assistance program pursuant to sections 8-265cc to 8-265kk, inclusive, of the general statutes, as amended by this act, and at any time outstanding, may at any time or from time to time, be refunded, in whole or in part, by the Connecticut Housing Finance Authority by the issuance of its refunding bonds in such amounts as the authority may deem necessary or appropriate but not exceeding an amount sufficient to refund the principal amount of the bonds to be so refunded, any unpaid interest thereon, and any premiums, commissions and costs of issuance necessary to be paid in connection therewith. The state, acting by and through the Office of Policy and Management and the State Treasurer and without further authorization, may execute an amendment to any contract providing state assistance as required in connection with such refunding bonds.

(c) Notwithstanding any contract entered into by the state with the Connecticut Housing Finance Authority for state assistance, the bonds or refunding bonds to which such state assistance applies shall not constitute bonds or notes issued or guaranteed by the state within the meaning of section 3-21 of the general statutes.

Sec. 12. (Effective July 1, 2008) The sum of fourteen million dollars is appropriated to the Connecticut Housing Finance Authority from the State Banking Fund, for the fiscal year ending June 30, 2009, for the program described in sections 8-265cc to 8-265kk, inclusive, as amended by this act.

Sec. 13. (NEW) (Effective July 1, 2008) (a) The WorkPlace, Inc. , in conjunction with the other regional workforce development boards pursuant to section 31-3k of the general statutes and the one-stop centers pursuant to section 31-3gg of the general statutes, shall establish a mortgage crisis job training program in accordance with this section. For purposes of the program, at least three mortgage crisis job training teams shall be established for different areas of the state. The WorkPlace, Inc. and Capital Workforce Partners shall manage such teams. The teams, in cooperation with the regional workforce development boards and the one-stop centers, shall ensure the provision of rapid, customized employment services, job training, repair training and job placement assistance to borrowers who are unemployed, underemployed or in need of a second job. The WorkPlace, Inc. shall arrange for the provision of financial literacy and credit counseling for participants in the program with the Connecticut Housing Finance Authority.

(b) Borrowers shall be eligible for the program if they are at least sixty days delinquent on their mortgages and (1) are referred by their Connecticut Housing Finance Authority lender, or (2) demonstrate an imminent need to increase earnings in order to avoid delinquency or foreclosure. Borrowers may also access the program through the one-stop centers.

(c) The WorkPlace, Inc. and the Connecticut Housing Finance Authority shall submit a joint report, in accordance with section 11-4a of the general statutes, on the implementation of the mortgage crisis job training program to the joint standing committees of the General Assembly having cognizance of matters relating to banks and planning and development, and to the select committee of the General Assembly having cognizance of matters relating to housing by January 1, 2009.

Sec. 14. (Effective July 1, 2008) The sum of two million five hundred thousand dollars is appropriated to the Labor Department from the State Banking Fund, for the fiscal year ending June 30, 2009, for the mortgage crisis job training program established in section 13 of this act.

Sec. 15. (NEW) (Effective July 1, 2008) As used in this section and sections 16 to 19, inclusive, of this act:

(1) "Mortgagor" means the owner-occupant of one-to-four family residential real property located in this state who is also the borrower under a mortgage encumbering such residential real property, which is the primary residence of such owner-occupant;

(2) "Residential real property" means a one-to-four family dwelling occupied as a residence by a mortgagor;

(3) "Mortgagee" means the original lender or servicer under a mortgage, or its successors or assigns, who is the holder of any mortgage on residential real property securing a loan made primarily for personal, family or household purposes that is the subject of a foreclosure action;

(4) "Authority" means the Connecticut Housing Finance Authority created under section 8-244 of the general statutes; and

(5) "Mortgage assistance programs" means the mortgage assistance programs developed and implemented by the authority in accordance with sections 1 and 2 of this act, and sections 8-265cc to 8-265kk, inclusive, of the general statutes, as amended by this act.

Sec. 16. (NEW) (Effective July 1, 2008) (a) Prior to July 1, 2010, when a mortgagee commences an action for the foreclosure of a mortgage on residential real property with a return date on or after July 1, 2008, the mortgagee shall give notice to the mortgagor of the foreclosure mediation program established in section 17 of this act by attaching to the front of the foreclosure complaint that is served on the mortgagor: (1) A copy of the notice of the availability of foreclosure mediation, in such form as the Chief Court Administrator prescribes, and (2) a foreclosure mediation request form, in such form as the Chief Court Administrator prescribes.

(b) (1) Except as provided in subdivision (2) of this subsection, a mortgagor may request foreclosure mediation by submitting the foreclosure mediation request form to the court and filing an appearance not more than fifteen days after the return day for the foreclosure action. Upon receipt of the foreclosure mediation request form, the court shall notify each appearing party that a foreclosure mediation request form has been submitted by the mortgagor.

(2) The court may grant a mortgagor permission to submit a foreclosure mediation request form and file an appearance after the fifteen-day period established in subdivision (1) of this subsection, for good cause shown, except that no foreclosure mediation request form may be submitted and no appearance may be filed more than twenty-five days after the return date.

(3) No foreclosure mediation request form may be submitted to the court on or after July 1, 2010.

(c) If at any time on or after July 1, 2008, but prior to July 1, 2010, the court determines that the notice requirement of subsection (a) of this section has not been met, the court may, upon its own motion or upon the written motion of the mortgagor, issue an order that no judgment may enter for fifteen days during which period the mortgagor may submit a foreclosure mediation request form to the court.

(d) Notwithstanding any provision of the general statutes or any rule of law to the contrary, prior to July 1, 2010, no judgment of strict foreclosure nor any judgment ordering a foreclosure sale shall be entered in any action instituted by the mortgagee to foreclose a mortgage on residential real property unless: (1) Notice to the mortgagor has been given by the mortgagee in accordance with subsection (a) of this section and the time for submitting a foreclosure mediation request form has expired and no foreclosure mediation request form has been submitted, or if such notice has not been given, the time for submitting a foreclosure mediation request form pursuant to subsection (b) or (c) of this section has expired and no foreclosure mediation request form has been submitted, or (2) the mediation period set forth in section 18 of this act has expired or has otherwise terminated, whichever is earlier.

(e) None of the mortgagor's or mortgagee's rights in the foreclosure action shall be waived by the mortgagor's submission of a foreclosure mediation request form to the court.

Sec. 17. (NEW) (Effective from passage) Not later than July 1, 2008, the Chief Court Administrator shall establish in each judicial district a foreclosure mediation program in actions to foreclose mortgages on residential real property. Such foreclosure mediation shall (1) address all issues of foreclosure, including, but not limited to, reinstatement of the mortgage, assignment of law days, assignment of sale date, restructuring of the mortgage debt and foreclosure by decree of sale, and (2) be conducted by foreclosure mediators who (A) are employed by the Judicial Branch, (B) are trained in mediation and all relevant aspects of the law, as determined by the Chief Court Administrator, (C) have knowledge of the community-based resources that are available in the judicial district in which they serve, and (D) have knowledge of the mortgage assistance programs. Such mediators may refer mortgagors who participate in the foreclosure mediation program to community-based resources when appropriate and to the mortgage assistance programs.

Sec. 18. (NEW) (Effective July 1, 2008) (a) The mediation period under the foreclosure mediation program established in section 17 of this act shall commence when the court sends notice to each appearing party that a foreclosure mediation request form has been submitted by a mortgagor to the court, which notice shall be sent not later than three business days after the court receives a completed foreclosure mediation request form. The mediation period shall conclude not more than sixty days after the return day for the foreclosure action, except that the court may, in its discretion, for good cause shown, extend by not more than ten days, or shorten, the mediation period on its own motion or upon motion of any party.

(b) The first mediation session shall be held not later than ten business days after the court sends notice to all parties that a foreclosure mediation request form has been submitted to the court. The mortgagor and mortgagee shall appear in person at each mediation session and shall have authority to agree to a proposed settlement, except that if the mortgagee is represented by counsel, the mortgagee's counsel may appear in lieu of the mortgagee to represent the mortgagee's interests at the mediation, provided such counsel has the authority to agree to a proposed settlement and the mortgagee is available during the mediation session by telephone or electronic means.

(c) Not later than two days after the conclusion of the first mediation session, the mediator shall determine whether the parties will benefit from further mediation. The mediator shall file with the court a report setting forth such determination and mail a copy of such report to each appearing party. If the mediator reports to the court that the parties will not benefit from further mediation, the mediation period shall terminate automatically. If the mediator reports to the court after the first mediation session that the parties may benefit from further mediation, the mediation period shall continue.

(d) If the mediator has submitted a report to the court that the parties may benefit from further mediation pursuant to subsection (c) of this section, not more than two days after the conclusion of the mediation, but no later than the termination of the mediation period set forth in subsection (a) of this section, the mediator shall file a report with the court describing the proceedings and specifying the issues resolved, if any, and any issues not resolved pursuant to the mediation. The filing of the report shall terminate the mediation period automatically. If certain issues have not been resolved pursuant to the mediation, the mediator may refer the mortgagor to any appropriate community-based services that are available in the judicial district, but any such referral shall not cause a delay in the mediation process.

(e) The Chief Court Administrator shall establish policies and procedures to implement this section. Such policies and procedures shall, at a minimum, provide that the mediator shall advise the mortgagor at the first mediation session required by subsection (b) of this section that: (1) Such mediation does not suspend the mortgagor's obligation to respond to the foreclosure action in accordance with applicable rules of the court; and (2) a judgment of strict foreclosure or foreclosure by sale may cause the mortgagor to lose the residential real property to foreclosure.

(f) In no event shall any determination issued by a mediator under this program form the basis of an appeal of any foreclosure judgment.

(g) Foreclosure mediation request forms shall not be accepted by the court on or after July 1, 2010, and the foreclosure mediation program shall terminate when all mediation has concluded with respect to any applications submitted to the court prior to July 1, 2010.

(h) At any time during the mediation period, the mediator may refer the mortgagor to the mortgage assistance programs, except that any such referral shall not prevent a mortgagee from proceeding to judgment when the conditions specified in subsection (d) of section 16 of this act have been satisfied.

Sec. 19. (NEW) (Effective July 1, 2008) Nothing in sections 15 to 18, inclusive, of this act, shall require a mortgagee to modify a mortgage or change the terms of payment of a mortgage without its consent.

Sec. 20. (Effective July 1, 2008) The sum of two million dollars is appropriated to the Judicial Department, from the State Banking Fund, for the fiscal year ending June 30, 2009, for the foreclosure mediation program established in section 17 of this act.

Sec. 21. (NEW) (Effective July 1, 2008) (a) As used in this section, sections 22 to 30, inclusive, and section 81 of this act:

(1) "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;

(2) "CHFA loan" means a loan made, insured, purchased, subsidized or guaranteed by the Connecticut Housing Finance Authority;

(3) "FHA loan" means a loan made, insured, purchased, subsidized or guaranteed by the Federal Housing Administration;

(4) "First mortgage loan" has the same meaning as provided in section 36a-485 of the 2008 supplement to the general statutes, as amended by this act;

(5) "Lender" means any person engaged in the business of the making of mortgage loans who is required to be licensed by the Department of Banking under chapter 668 of the general statutes or the 2008 supplement to the general statutes, as amended by this act, or their successors or assigns, and shall also mean any bank, out-of-state bank, Connecticut credit union, federal credit union, out-of-state credit union, or an operating subsidiary of a federal bank or a federally chartered out-of-state bank where such subsidiary engages in the business of making mortgage loans, and their successors and assigns, but shall not include any mortgage broker, as defined in this section, or any mortgage loan originator, as defined in section 36a-485 of the 2008 supplement to the general statutes, as amended by this act;

(6) "Mortgage broker" means any person, other than a lender, who (A) for a fee, commission or other valuable consideration, negotiates, solicits, arranges, places or finds a mortgage, and (B) who is required to be licensed by the Department of Banking under chapter 668 of the general statutes or the 2008 supplement to the general statutes, or their successors or assigns;

(7) "Nonprime home loan" means any loan or extension of credit, excluding an open-end line of credit, and further excluding a reverse mortgage transaction, as defined in 12 CFR 226. 33, as amended from time to time:

(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 property located in this state which is, or when the loan is made, intended to be used or occupied by the borrower as a principal residence;

(D) In which the principal amount of the loan does not exceed (i) four hundred seventeen thousand dollars for a loan originated on or after July 1, 2008, but before July 1, 2010; and (ii) the then current conforming loan limit, as established from time to time by the Federal National Mortgage Association, for a loan originated on or after July 1, 2010;

(E) Where the loan is not a CHFA loan; and

(F) In which the conditions set forth in clauses (i) and (ii) of this subparagraph apply, subject to any adjustments made pursuant to clause (iii) of this subparagraph:

(i) The difference between the APR for the loan or extension of credit and the yield on United States Treasury securities having comparable periods of maturity is either equal to or greater than (I) three percentage points, if the loan is a first mortgage loan, or (II) five percentage points, if the loan is a secondary mortgage loan. For purposes of such calculation, without regard to whether the loan is subject to or reportable under the provisions of the federal Home Mortgage Disclosure Act, 12 USC 2801 et seq. , the difference between the APR and the yield on United States Treasury securities having comparable periods of maturity shall be determined using the same procedures and calculation methods applicable to loans that are subject to the reporting requirement of the federal Home Mortgage Disclosure Act, as those procedures and calculation methods are amended from time to time, provided the yield on United States Treasury securities is determined as of the fifteenth day of the month prior to the application for the loan.

(ii) The difference between the APR for the loan and the conventional mortgage rate is either equal to or greater than (I) one and three-quarters percentage points, if the loan is a first mortgage loan, or (II) three and three-quarters percentage points, if the loan is a secondary mortgage loan. For purposes of such calculation, "conventional mortgage rate" means the most recent daily contract interest rate on commitments for fixed-rate mortgages published by the board of governors of the federal reserve system in its statistical release H. 15, or any publication that may supersede it, during the week in which the interest rate for the loan is set.

(iii) The commissioner shall have the authority, after consideration of the relevant factors, to increase the percentages set forth in clauses (i) and (ii) of this subparagraph. The authority of the commissioner, and any increases or decreases made under this clause, shall expire on August 31, 2009. For purposes of this clause, the relevant factors to be considered by the commissioner shall include, but not be limited to, the existence and amount of increases in fees or charges in connection with purchases of mortgages by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation and increases in fees or charges imposed by mortgage insurers and the impact, including the magnitude of the impact, that such increases have had, or will likely have, on APRs for mortgage loans in this state. When considering such factors, the commissioner shall focus on those increases that are related to the deterioration in the housing market and credit conditions. The commissioner may refrain from increasing such percentages if it appears that lenders are increasing interest rates or fees in bad faith or if increasing the percentages would be contrary to the purposes of sections 21 to 27, inclusive, of this act. No increase authorized by the commissioner to a particular percentage shall exceed one-quarter of one percentage point, and the total of all increases to a particular percentage under this clause shall not exceed one-half of one percentage point. No increase shall be made unless: (I) The increase is noticed in the Banking Department Bulletin and the Connecticut Law Journal, and (II) a public comment period of twenty days is provided. Any increase made under this clause shall be reduced proportionately when the need for the increase has diminished or no longer exists. The commissioner, in the exercise of his discretion, may authorize an increase in the percentages with respect to all loans or just with respect to a certain class or classes of loans;

(8) "Open-end line of credit" means a mortgage extended by a lender under a plan in which: (A) The lender reasonably contemplates repeated transactions; (B) the lender may impose a finance charge from time to time on an outstanding unpaid balance; (C) the amount of credit that may be extended to the consumer during the term of the plan, up to any limit set by the lender, is generally made available to the extent that any outstanding balance is repaid; and (D) none of the proceeds of the open-end line of credit are used at closing to (i) purchase the borrower's primary residence, or (ii) refinance a mortgage loan that had been used by the borrower to purchase the borrower's primary residence;

(9) "Residential property" has the same meaning as provided in section 36a-485 of the 2008 supplement to the general statutes, as amended by this act;

(10) "Secondary mortgage loan" has the same meaning as provided in section 36a-485 of the 2008 supplement to the general statutes, as amended by this act.

(b) The provisions of sections 22 to 30, inclusive, of this act shall be applicable to nonprime home loans and mortgages, as appropriate, for which applications have been received on or after August 1, 2008.

Sec. 22. (NEW) (Effective July 1, 2008) (a) A lender shall not engage in conduct in any transaction, practice or course of business in connection with the making of a nonprime home loan that is misleading, deceptive or untruthful.

(b) Lenders and mortgage brokers shall have a duty of good faith with respect to the performance of any contract with a borrower relative to a nonprime home loan. For purposes of this subsection, the duty of good faith is the same as the obligation imposed pursuant to section 42a-1-304 of the general statutes, and includes the observance of reasonable common standards of fair dealing. The provisions of this subsection cannot be waived.

(c) In connection with a nonprime home loan that is a first mortgage loan, a lender shall provide the borrower with a notice or letter that generally describes the terms of the transaction. Such notice or letter shall be provided no later than three business days prior to the closing, unless the borrower expressly requests an expedited closing and the lender has not yet, acting in good faith, provided the letter or notice. In cases where a letter or notice is required, the lender shall notify the borrower, within a reasonable time period, of any subsequent material changes to the terms of the transaction. The provisions of this subsection cannot be waived.

Sec. 23. (NEW) (Effective July 1, 2008) (a) No lender shall make a nonprime home loan unless the lender reasonably believes, at the time the loan is consummated, that one or more of the obligors, when considered individually or collectively, will be able to make the scheduled payments to repay the loan, and to pay related real estate taxes and insurance premiums, based upon a consideration of the obligor's current and expected income, current and expected obligations as disclosed by the obligor, or otherwise known to the lender, including subordinate mortgages made contemporaneously, homeowner's fees, condominium fees, employment status and other financial resources, excluding the equity in the dwelling that secures repayment of the loan. Notwithstanding the provisions of this subsection, in the case of a bridge loan, a lender may consider the equity in the dwelling as a source of repayment for the loan.

(b) A lender's analysis of an obligor's ability to repay under subsection (a) of this section may utilize commercially recognized underwriting standards and methodologies, including automated underwriting systems, provided they comply with the requirements of this subsection and subsection (a) of this section. In determining an obligor's ability to repay a nonprime home loan, the lender shall take reasonable steps to verify the accuracy and completeness of information provided by or on behalf of the obligor using tax returns, consumer reports, payroll receipts, bank records, reasonable alternative methods or reasonable third-party verification. In determining an obligor's ability to repay a nonprime home loan according to its terms when the loan has an adjustable rate feature, the lender shall underwrite the repayment schedule assuming that the interest rate is a fixed rate equal to the fully indexed interest rate at the time of consummation, or within fifteen days thereof, without considering any initial discounted rate. For purposes of this subsection, the "fully indexed rate" means the interest rate that would have been applied had the initial interest rate been determined by the application of the same interest rate formula that applies under the terms of the loan documents to subsequent interest rate adjustments, disregarding any limitations on the amount by which the interest rate may change at any one time. In determining an obligor's ability to repay a nonprime home loan that is not fully amortizing by its terms, the lender shall underwrite the loan based on a fully amortizing repayment schedule based on the maturity set forth in the note.

(d) This section shall not apply to FHA loans.

Sec. 24. (NEW) (Effective July 1, 2008) (a) No lender shall make a nonprime home loan where all or a portion of the proceeds are used to fully or partially pay off a special mortgage on the same property unless the borrower has obtained a written certification from a counselor with an independent third-party nonprofit organization approved by the United States Department of Housing and Urban Development that the borrower has received mortgage counseling. For purposes of this section, "special mortgage" means a loan originated, subsidized or guaranteed by or through a state, federal, tribal or local government, or nonprofit organization.

(b) The prohibition in subsection (a) of this section shall not apply where the borrower provides the lender with a statement from an organization described in subsection (a) of this section, on the organization's letterhead, stating that the required counseling is not available for at least thirty days from the date of the request for counseling.

(c) For purposes of this section, a lender shall make a good-faith effort to determine whether the loan to be refinanced is a special mortgage, but shall not be required to obtain the certification in subsection (a) of this section if the lender: (1) Makes a good-faith inquiry to the current holder or servicer of the loan and to the borrower as to whether the loan is a special mortgage; and (2) does not receive an affirmative response from either the current holder or servicer of the loan or the borrower indicating that it is a special mortgage.

Sec. 25. (NEW) (Effective July 1, 2008) A lender shall not make a nonprime home loan unless:

(1) With respect to nonprime home loans that are first mortgage loans originated on or after January 1, 2010, the lender requires and collects a monthly escrow for the payment of real property taxes and homeowner's insurance. The provisions of this subdivision shall not apply to: (A) FHA loans; or (B) a nonprime home loan product which, in good faith, is generally designed and marketed to the public as a subordinate lien home equity loan product but is secured by a first mortgage loan;

(2) To the extent applicable, the lender obtains the written certification or statement under section 24 of this act; and

(3) The lender mailed or delivered to applicants, no later than three business days after the receipt of a completed application for a nonprime home loan, a notice containing a toll-free number that can be used to obtain a list of nonprofit housing counselors approved by the United States Department of Housing and Urban Development. For purposes of this subdivision, a lender may use the toll-free number which satisfies the requirements of Section 106(c)(5) of the Housing and Urban Development Act of 1968 (12 USC 1701(x) Section (c)(5)). No borrower shall have a private right of action for the lender's failure to deliver, on a timely basis, a notice required by this subdivision.

Sec. 26. (NEW) (Effective July 1, 2008) (a) A lender shall not offer a nonprime home loan that contains:

(1) A prepayment penalty, except that this prohibition shall not apply to FHA loans;

(2) A provision that increases the interest rate after default other than a failure to comply with a provision to maintain an automatic electronic payment feature where that maintenance provision has been provided in return for an interest rate reduction and the increase is no greater than that reduction;

(3) A provision requiring a borrower, whether acting individually or on behalf of others similarly situated, to assert any claim or defense in a nonjudicial forum that: (A) Utilizes principles which are inconsistent with the law as set forth in the general statutes or common law; (B) limits any claim or defense the borrower may have; or (C) is less convenient, more costly or more dilatory for the resolution of a dispute than a judicial forum established in this state where the borrower may otherwise properly bring a claim or defense.

(b) If a nonprime home loan contains a provision which violates subdivision (1), (2) or (3) of subsection (a) of this section, that provision shall be void and unenforceable.

Sec. 27. (NEW) (Effective July 1, 2008) No lender or mortgage broker shall attempt in bad faith to avoid the application of sections 22 to 29, inclusive, of this act, by dividing any loan transaction into separate parts or to structure in bad faith a residential mortgage loan transaction as an open-end loan for the purpose of evading the applicable provisions of sections 22 to 29, inclusive, of this act, when the loan would have been a nonprime home loan if the loan had been structured as a closed-end loan.

Sec. 28. (NEW) (Effective July 1, 2008) (a) As used in this section and section 29 of this act, the term "mortgage" means a mortgage deed or other instrument that constitutes a first or secondary consensual lien upon any interest in one-to-four family residential real property located in this state, that is, or when the loan is made, intended to be occupied by the borrower as a principal residence. "Mortgage" includes, but is not limited to, a nonprime home loan.

(b) A lender shall not make and a mortgage broker shall not offer a nonprime home loan that refinances a mortgage unless the nonprime home loan provides or is expected to provide a tangible net benefit to the borrower. A lender or mortgage broker shall not take any action that recommends or encourages a default on an existing mortgage or other debt prior to and in connection with the closing or planned closing of a new nonprime home loan that refinances all or any portion of the existing loan or debt.

(c) A lender may not finance, directly or indirectly in connection with a mortgage, any credit life, credit disability, credit unemployment or credit property insurance, or any other life or health insurance or any payments directly or indirectly for any debt cancellation or suspension agreement or contract, except that insurance premiums or debt cancellation or suspension fees calculated and paid on a monthly basis or through regularly scheduled periodic payments shall not be considered financed by the lender for the purposes of this subsection.

(d) If all defaults in connection with a nonprime home loan are cured after the initiation of any action to foreclose, but prior to the entry of judgment, the lender shall take steps as necessary to terminate the foreclosure proceeding or other action. The lender may require that the borrower pay any reasonable costs actually incurred by the lender in connection with the default and protecting its rights in the property, including any costs related to collection, foreclosure and termination of the proceeding or other action. Cure of default reinstates the borrower to the same position as if the default had not occurred and nullifies, as of the date of the cure, any acceleration of any obligation under the security instrument or note arising from the default. The borrower's right to reinstatement, as described in this subsection, may not be exercised by the borrower on more than two occasions over the course of twenty-four consecutive months.

Sec. 29. (NEW) (Effective July 1, 2008) A mortgage broker, in addition to duties imposed by federal statutes, other provisions of the general statutes or at common law, shall: (1) Use reasonable care, skill and diligence in performing the mortgage broker's duties and shall act in good-faith and fair dealing in all transactions with the borrower; (2) make reasonable good-faith efforts to secure a mortgage that is in the reasonable interests of the borrower considering all the circumstances reasonably available to the mortgage broker, including, but not limited to, the rates, points, fees, charges, costs and product type; (3) ensure that the cost of credit is reasonably appropriate considering the borrower's level of creditworthiness and other bona fide underwriting concerns; and (4) notify, before the closing, each lender of the payment obligations associated with each of the other lender's loans if the mortgage broker knows that more than one mortgage will be made by different lenders contemporaneously to a borrower secured by the same real property. The duties under this section may not be waived.

Sec. 30. (NEW) (Effective July 1, 2008) (a) A borrower who has been injured by a violation of sections 22 to 29, inclusive, of this act, may bring a claim in a court of competent jurisdiction by the date three years after the date of the closing for the following: The greater of actual damages or one thousand dollars; and costs and reasonable attorney's fees, unless:

(1) By the date ninety days after the date of the loan closing and prior to the commencement of any action against a lender under this section, the borrower is notified by the lender of the compliance failure, the lender tenders appropriate restitution and the lender either (A) makes the nonprime home loan comply with the applicable provisions of sections 22 to 29, inclusive, of this act; or (B) changes the terms of the mortgage in a manner beneficial to the borrower so that the mortgage will no longer be considered a nonprime home loan subject to the provisions of sections 22 to 29, inclusive, of this act; or

(2) The lender is able to show by a preponderance of evidence that the compliance failure was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such errors. For the purposes of this subdivision, the phrase "bona fide error" includes, but is not limited to, a clerical, calculation, printing, computer malfunction or programming error, but does not include an error of legal judgment with respect to a lender's obligations under the relevant provisions of sections 22 to 29, inclusive, of this act. In actions where the compliance failure has caused material injury to the borrower, the lender shall also be able to show that it cured the compliance failure or otherwise undertook reasonable remedial steps to address or compensate for the injury; or

(3) The lender and borrower otherwise reach a mutual agreement on an appropriate remedy or curative action.

(b) In addition, the court may grant an injured borrower such relief as it deems just and equitable.

(c) A borrower or mortgagor may assert fraud and any violation of sections 22 to 29, inclusive, of this act which causes material injury to a borrower as a counterclaim or defense to foreclosure by the date six years after the date of the closing.

(d) Nothing in this section shall be construed as creating or permitting a cause of action or defense or counterclaim against an assignee of a nonprime home loan or other mortgage loan with respect to a violation of sections 22 to 29, inclusive, of this act by the originating lender or mortgage broker.

Sec. 31. (Effective July 1, 2008) Sections 1 to 25, inclusive, of public act 07-156 shall take effect July 1, 2008.

Sec. 32. Section 36a-1 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2008):

This title shall be known as the "Banking Law of Connecticut" and shall be applicable to all Connecticut banks, Connecticut credit unions, [first and secondary] mortgage lenders, mortgage correspondent lenders, mortgage loan originators and mortgage brokers, money order and travelers check licensees, check cashing service licensees, trustees under mortgages or deeds of trust of real property securing certain investments, corporations exercising fiduciary powers, small loan licensees, sales finance companies, mortgage servicing companies, debt adjusters, and to such other persons as subject themselves to the provisions of this title or who, by violating any of its provisions, become subject to the penalties provided in this title.

Sec. 33. Section 36a-2 of the 2008 supplement to the general statutes, as amended by section 2 of public act 07-156, is repealed and the following is substituted in lieu thereof (Effective July 1, 2008):

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 amended 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 amended 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 amended 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 amended 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 amended 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 amended 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) ["National mortgage licensing system"] "Nationwide Mortgage Licensing System" means the [national] nation-wide mortgage licensing system [to be] implemented pursuant to a uniform mortgage licensing project under the auspices of the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators;

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

(45) "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;

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

(47) "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;

(48) "Person" means an individual, company, including a company described in subparagraphs (A) and (B) of subdivision (11) of this section, or any other legal entity, including a federal, state or municipal government or agency or any political subdivision thereof;

(49) "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;

(50) "Prepayment penalty" means any charge or penalty for paying all or part of the outstanding balance owed on a loan 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 amended from time to time;

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

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

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

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

[(54)] (55) "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;

[(55)] (56) "Retail deposits" means any deposits made by individuals who are not "accredited investors", as defined in 17 CFR [Section] 230. 501(a);

[(56)] (57) "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;

[(57)] (58) "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;

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

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

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

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

[(62)] (63) "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;

[(63)] (64) "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;

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

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

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

[(67)] (68) "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;

[(68)] (69) "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;

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

[(70)] (71) "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 amended from time to time; [amended; ]

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

[(72)] (73) "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. 34. Section 36a-3 of the 2008 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2008):

Other definitions applying to this title or to specified parts thereof and the sections in which they appear are:

	"Account". Sections 36a-155 and 36a-365.
	"Additional proceeds". Section 36a-746e.
	"Administrative expense". Section 36a-237.
	"Advance fee". Sections 36a-485 [, 36a-510] of the 2008 supplement
	to the general statutes, as amended by this act, and 36a-615, as
	amended by this act.
	"Advertise" or "advertisement". [Sections] Section 36a-485 [and 36a-
	510] of the 2008 supplement to the general statutes, as amended by
	this act.
	"Agency bank". Section 36a-285.
	"Alternative mortgage loan". Section 36a-265.
	"Amount financed". Section 36a-690.
	"Annual percentage rate". Section 36a-690.
	"Annual percentage yield". Section 36a-316, as amended by this act.
	"Annuities". Section 36a-455a.
	"Applicant". Section 36a-736, as amended by this act.
	"APR". Section 36a-746a, as amended by this act.
	"Assessment area". Section 36a-37.
	"Assets". Section 36a-70.
	"Associate". Section 36a-184.
	"Associated member". Section 36a-458a.
	"Bank". Section 36a-30.
	"Bankers' bank". Section 36a-70.
	"Banking business". Section 36a-425.
	"Basic services". Section 36a-437a.
	"Billing cycle". Section 36a-565.
	"Bona fide nonprofit organization". Section 36a-655.
	"Branch". Sections 36a-145 of the 2008 supplement to the
	general statutes, 36a-410 of the 2008 supplement to the
	general statutes and 36a-435b.
	"Branch office". Section 36a-485 of the 2008 supplement to the
	general statutes, as amended by this act.
	"Branch or agency net payment entitlement". Section 36a-428n.
	"Branch or agency net payment obligation". Section 36a-428n.
	"Broker". Section 36a-746a, as amended by this act.
	"Business and industrial development corporation". Section 36a-626.
	"Business and property in this state". Section 36a-428n.
	"Capital". Section 36a-435b.
	"Cash advance". Section 36a-564.
	"Cash price". Section 36a-770.
	"Certificate of incorporation". Section 36a-435b.
	"CHFA loan". Section 21 of this act.
	"Closely related activities". Sections 36a-250 and 36a-455a.
	"Collective managing agency account". Section 36a-365.
	"Commercial vehicle". Section 36a-770.
	"Community bank". Section 36a-70.
	"Community credit union". Section 36a-37.
	"Community development bank". Section 36a-70.
	"Community reinvestment performance". Section 36a-37.
	"Connecticut holding company". Sections 36a-53 of the
	2008 supplement to the general statutes and 36a-410 of
	the 2008 supplement to the general statutes.
	"Consolidate". Section 36a-145 of the 2008 supplement to
	the general statutes.
	"Construction loan". Section 36a-458a.
	"Consumer". Sections 36a-155, 36a-676 and 36a-695.
	"Consumer Credit Protection Act". Section 36a-676.
	"Consumer debtor" and "debtor". Sections 36a-645 and
	36a-800 of the 2008 supplement to the general statutes.
	"Consumer collection agency". Section 36a-800 of the 2008
	supplement to the general statutes.
	"Consummation". Section 36a-746a, as amended by this act.
	"Controlling interest". Section 36a-276.
	"Conventional mortgage rate". Section 21 of this act.
	"Corporate". Section 36a-435b.
	"Credit". Sections 36a-645 and 36a-676.
	"Credit manager". Section 36a-435b.
	"Creditor". Sections 36a-676, 36a-695 and 36a-800 of the
	2008 supplement to the general statutes.
	"Credit card", "cardholder" and "card issuer". Section 36a-676.
	"Credit clinic". Section 36a-700.
	"Credit rating agency". Section 36a-695.
	"Credit report". Section 36a-695.
	"Credit sale". Section 36a-676.
	"Credit union service organization". Section 36a-435b.
	"Credit union service organization services". Section 36a-435b.
	"De novo branch". Section 36a-410 of the 2008 supplement
	to the general statutes.
	"Debt". Section 36a-645.
	"Debt adjustment". Section 36a-655.
	"Debt mutual fund". Sections 36a-275 and 36a-459a.
	"Debt securities". Sections 36a-275 and 36a-459a.
	"Debtor". Section 36a-655.
	"Deliver". Section 36a-316, as amended by this act.
	"Deposit". Section 36a-316, as amended by this act.
	"Deposit account". Section 36a-316, as amended by this act.
	"Deposit account charge". Section 36a-316, as amended by this act.
	"Deposit account disclosures". Section 36a-316, as amended by this
	act.
	"Deposit contract". Section 36a-316, as amended by this act.
	"Deposit services". Section 36a-425.
	"Depositor". Section 36a-316, as amended by this act.
	"Director". Section 36a-435b.
	"Earning period". Section 36a-316, as amended by this act.
	"Electronic payment instrument". Section 36a-596 of the
	2008 supplement to the general statutes.
	"Eligible collateral". Section 36a-330.
	"Equity mutual fund". Sections 36a-276 and 36a-459a.
	"Equity security". Sections 36a-276 and 36a-459a.
	"Executive officer". Sections 36a-263 and 36a-469c.
	"Federal Credit Union Act". Section 36a-435b.
	"Federal Home Mortgage Disclosure Act". Section 36a-736, as
	amended by this act.
	"FHA loan". Section 21 of this act.
	"Fiduciary". Section 36a-365.
	"Filing fee". Section 36a-770.
	"Finance charge". Sections 36a-690 and 36a-770.
	"Financial institution". Sections 36a-41, 36a-44a, 36a-155, 36a-316, as
	amended by this act, 36a-330, 36a-435b, [and] 36a-736, as amended
	by this act, and 36a-755, as amended by this act.
	"Financial records". Section 36a-41.
	["First mortgage broker". Section 36a-485.
	"First mortgage correspondent lender". Section 36a-485.
	"First mortgage lender". Section 36a-485. ]
	"First mortgage loan". Sections 36a-485 of the 2008
	supplement to the general statutes, as amended by this act, 36a-705,
	[and] as amended by this act, 36a-715, as amended by this act, and</