OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http: //www. cga. ct. gov/ofa

sHB-5577

AN ACT CONCERNING RESPONSIBLE LENDING AND ECONOMIC SECURITY.

OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 09 $

FY 10 $

Banking Dept.

BF - Cost

4,700,000

900,000

Department of Economic & Community Development

GF - Cost

Potential Significant

Potential Significant

Comptroller Misc. Accounts (Fringe Benefits)1

GF - Cost

Potential Significant

Potential Significant

Connecticut Housing Finance Authority – quasi public agency

See Below

See Below

See Below

Note: BF=Banking Fund; GF=General Fund

Municipal Impact: None

Explanation

The bill requires the Department of Economic and Community Development to aid in administering the Homeowner's Equity Recovery Opportunity Loan (HERO) program and the emergency mortgage assistance program (EMAP) developed by the mortgage assistance program committee. It is unclear which committee-approved agency would provide and pay for the required financial counseling under the REfinance to an Affordable Loan (REAL) program.

DECD could require up to 18 additional personnel totaling approximately $1. 0 million to administer the assistance programs. DECD responsibilities under the bill include accepting applications, servicing loans, and performing procedures and abiding by standards to be established by the mortgage assistance committee. The positions associated with this include: a community development director and specialist, three agents and three assistant agents, a fiscal administrative officer, two attorneys, two paralegals, and a full-time accounts examiner. Positions also include an administrative assistant and two secretaries. Assuming DECD will service the mortgage assistance hot line established in the bill, an additional secretary would be needed. The fringe benefits for all employees would total $264,000 in FY 09 and $610,000 in FY 10.

The bill transfers $40 million from the Connecticut Housing Finance Authority (CHFA) to the Department of Economic and Community Development to administer the mortgage assistance programs. To the extent that this violates CHFA's covenant with holders of its bonds, the bill could result in legal costs to the state.

To the degree that the bill has an adverse effect on the financial markets' perception of the creditworthiness of Connecticut or CHFA, the bill could lower the state's or CHFA's credit ratings, which would increase the cost of future bonded indebtedness.

The bill requires the workforce development boards to establish a Mortgage Crisis Job Training Team in conjunction with CTWorks One Stop Career Centers. There could be a minimal cost to the Department of Labor to the extent services beyond those currently offered One Stop Centers are required.

The bill results in a cost of approximately $4,700,000 in FY 09 to the Department of Banking (DOB) including funds for seven new positions and associated fringe benefits and other expenses along with funds needed to create a data system to meet requirements set forth in the bill. Staffing needs include two attorneys necessitated by the number and timeframes set forth for new regulations in the bill. Additionally the DOB would need to establish a real estate division which initially would require five staff but could eventually grow larger. Finally the bill would require the DOB to create a data base system for mortgage lending businesses that are required to be licensed under the banking statutes.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

1 The fringe benefit costs for state employees are budgeted centrally in the Miscellaneous Accounts administered by the Comptroller. The first year fringe benefit costs for new positions do not include pension costs. The estimated first year fringe benefit rate as a percentage of payroll is 25. 36%. The state's pension contribution is based upon the prior year's certification by the actuary for the State Employees Retirement System (SERS). The SERS fringe benefit rate is 33. 27%, which when combined with the rate for non-pension fringe benefits totals 58. 63%.