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General Assembly

 

Substitute Bill No. 208

    February Session, 2008

*_____SB00208JUD___032408____*

AN ACT PROHIBITING PENALTIES FOR PREPAYMENT OF CERTAIN MORTGAGE LOANS AND AUTHORIZING BONDS OF THE STATE FOR THE EMERGENCY MORTGAGE ASSISTANCE PAYMENT PROGRAM.

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

Section 1. (NEW) (Effective October 1, 2008) (a) As used in this section:

(1) "Subprime" means:

(A) In the case of an adjustable rate loan secured by a first lien on a dwelling, a loan for which the APR is greater than two percentage points above the yield on United States Treasury securities having comparable periods of maturity as of the fifteenth day of the preceding month if the rate is set between the first and the fourteenth day of the month, and as of the fifteenth day of the current month if the rate is set on or after the fifteenth day.

(B) For all other loans secured by a first lien on a dwelling, a loan for which the APR is greater than three percentage points above the yield on United States Treasury securities having comparable periods of maturity as of the fifteenth day of the preceding month if the rate is set between the first and the fourteenth day of the month, and as of the fifteenth day of the current month if the rate is set on or after the fifteenth day.

(C) For loans secured by a subordinate lien on a dwelling, a loan for which the APR is greater than five percentage points above the yield on United States Treasury securities having comparable periods of maturity as of the fifteenth day of the preceding month if the rate is set between the first and the fourteenth day of the month, and as of the fifteenth day of the current month if the rate is set on or after the fifteenth day; and

(2) "Nontraditional mortgage" has the same meaning as set forth in the "Interagency Guidance on Nontraditional Mortgage Product Risks", 71 Federal Register 58609 (Oct. 4, 2006), as amended from time to time.

(b) No prepayment fee or penalty may be charged or collected under the terms of a subprime or nontraditional mortgage loan when the mortgagee requires that payments be accelerated in a mortgage refinance, sale of the real property mortgaged or foreclosure action. Any prepayment fee, penalty or charge in violation of this section shall be void and unenforceable.

Sec. 2. (Effective July 1, 2008) (a) For the purposes described in subsection (b) of this section, the State Bond Commission shall have the power, from time to time, to authorize the issuance of bonds of the state in one or more series and in principal amounts not exceeding in the aggregate fifty million dollars.

(b) The proceeds of the sale of said bonds, to the extent of the amount stated in subsection (a) of this section, shall be used by the Connecticut Housing Finance Authority for the purpose of recapitalization of the emergency mortgage assistance payment program established pursuant to sections 8-265cc to 8-265kk, inclusive, of the general statutes or the 2008 supplement to the general statutes.

(c) All provisions of section 3-20 of the general statutes, or the exercise of any right or power granted thereby, which are not inconsistent with the provisions of this section are hereby adopted and shall apply to all bonds authorized by the State Bond Commission pursuant to this section, and temporary notes in anticipation of the money to be derived from the sale of any such bonds so authorized may be issued in accordance with said section 3-20 and from time to time renewed. Such bonds shall mature at such time or times not exceeding twenty years from their respective dates as may be provided in or pursuant to the resolution or resolutions of the State Bond Commission authorizing such bonds. None of said bonds shall be authorized except upon a finding by the State Bond Commission that there has been filed with it a request for such authorization which is signed by or on behalf of the Secretary of the Office of Policy and Management and states such terms and conditions as said commission, in its discretion, may require. Said bonds issued pursuant to this section shall be general obligations of the state and the full faith and credit of the state of Connecticut are pledged for the payment of the principal of and interest on said bonds as the same become due, and accordingly and as part of the contract of the state with the holders of said bonds, appropriation of all amounts necessary for punctual payment of such principal and interest is hereby made, and the State Treasurer shall pay such principal and interest as the same become due.

This act shall take effect as follows and shall amend the following sections:

Section 1

October 1, 2008

New section

Sec. 2

July 1, 2008

New section

PD

Joint Favorable Subst. C/R

JUD

JUD

Joint Favorable