Sec. 36a-265. (Formerly Sec. 36-9g). Alternative mortgage loan. - Connecticut Statutes

      Sec. 36a-265. (Formerly Sec. 36-9g). Alternative mortgage loan. (a) (1) "Mortgage loan" means a loan secured by a first mortgage on one, two, three or four family, owner-occupied residential real property;

      (2) "Standard mortgage loan" means a mortgage loan authorized by section 36a-261 or section 36a-457b for the Connecticut bank or Connecticut credit union making such loan;

      (3) "Alternative mortgage loan" means a mortgage loan which is a reverse annuity mortgage loan or graduated payment mortgage loan, other than a standard mortgage loan;

      (4) "Reverse annuity mortgage loan" means a mortgage loan in which loan proceeds are advanced to the mortgagors, in installments, either directly or indirectly, and which together with unpaid interest, if any, is to be repaid in accordance with subdivision (2) of subsection (e) of this section; and

      (5) "Graduated payment mortgage loan" means a mortgage loan, other than a standard mortgage loan, in which principal and interest payments, if any, and the making of additional advances, if any, are designed to reflect the prospective increasing or decreasing income of the mortgagor.

      (b) Notwithstanding any other provision of the general statutes, Connecticut banks and Connecticut credit unions may make alternative mortgage loans in accordance with this section. The provisions of the general statutes governing standard mortgage loans by a Connecticut bank or Connecticut credit union making such loans shall apply to alternative mortgage loans unless inconsistent with the provisions of this section. Nothing in this section shall be construed to prohibit a Connecticut bank or Connecticut credit union from making any loan which is not an alternative mortgage loan, provided such loan otherwise complies with the general statutes.

      (c) A Connecticut bank or Connecticut credit union making an alternative mortgage loan may contract with the mortgagor for interest to be paid currently or to accrue, and if accrued, for accrued interest to be added to the mortgage debt on which interest may be charged and collected. Such accrued interest which is added to the mortgage debt shall be secured by the mortgage to the same extent as the principal of such alternative mortgage debt. No instrument evidencing an alternative mortgage loan and no deed granting an alternative mortgage shall contain any provision imposing a penalty for prepayment of such loan.

      (d) (1) Each Connecticut bank and Connecticut credit union that offers or makes any type of alternative mortgage loan shall disclose to each person who requests an application for a mortgage loan or who states that such person is a prospective mortgage loan applicant such information concerning all types of mortgage loans, including each type of alternative mortgage loan, offered by such bank or credit union as the commissioner shall prescribe by regulations. The commissioner may prescribe forms for such disclosure.

      (2) Each prospective mortgage loan applicant shall have the choice of applying for a standard mortgage loan or any type of alternative mortgage loan offered by such Connecticut bank or Connecticut credit union.

      (e) (1) If the mortgagee or its assignee and the mortgagor agree, any installment payment of either the loan proceeds or any annuity purchased with the loan proceeds of a reverse annuity mortgage loan may be reduced by an amount used for partial repayment of the mortgage debt, except as provided in subdivision (2) of this subsection.

      (A) Notwithstanding any such reduction, each mortgagor shall receive a cash payment in each installment for the term of the annuity or, if no annuity, for the term during which the mortgagee contracted with the mortgagor to advance loan proceeds; and

      (B) No repayments of any part of the mortgage debt shall be required from the mortgagor after termination of the period during which loan proceeds or any annuity purchased with the loan proceeds are advanced to the mortgagor.

      (2) If the mortgagee or its assignee and the mortgagor agree, and at the option of the mortgagee, advances under a reverse annuity mortgage loan may terminate and the entire unpaid balance of the loan plus accrued interest may become due and payable upon the occurrence of any of the following events:

      (A) The death of the last surviving mortgagor;

      (B) The sale or other transfer of the real estate securing the loan to a person other than any of the original mortgagors; or

      (C) Any other occurrence which materially decreases the value of the property securing the loan or which will have the likely effect of causing the loan not to be repaid. Any such additional occurrence shall be clearly recited in the mortgage deed.

      (f) Every graduated payment mortgage loan offered or made by a Connecticut bank or Connecticut credit union shall provide for interest at a specified rate or a series of specified rates.

      (g) The commissioner may adopt such regulations pursuant to chapter 54 as the commissioner deems necessary to carry out the provisions of this section.

      (P.A. 78-114, S. 1-7; P.A. 79-158, S. 1; P.A. 88-65, S. 47; P.A. 94-122, S. 122, 340; P.A. 96-109, S. 3; P.A. 02-73, S. 77.)

      History: P.A. 79-158 clarified applicability of definitions in Subsec. (a), clarified applicability of provisions to alternative mortgage loans in Subsec. (b), added provisions re interest on alternative loans in Subsec. (c), required disclosure to persons requesting mortgage loan applications in Subsec. (d), required commissioner to review mortgage deed re default provisions and inserted new Subdiv. (3) in Subsec. (e), renumbering former Subdiv. (3) accordingly, inserted new Subsec. (f) and relettered former Subsecs. (f) and (g) accordingly; P.A. 88-65 made a technical change in Subsec. (a)(5), deleted obsolete Subsec. (e), re prototype plans for alternative mortgage loans and relettered remaining Subsecs; P.A. 94-122 deleted the definition of financial institution, renumbered the remaining definitions and made technical changes, effective January 1, 1995; Sec. 36-9g transferred to Sec. 36a-265 in 1995; P.A. 96-109 made a technical change, adding reference to Sec. 36a-442 in Subsec. (a)(2); P.A. 02-73 amended Subsec. (a)(2) by replacing reference to Sec. 36a-442 with reference to Sec. 36a-457b.

      Annotations to former section 36-9g:

      Cited. 190 C. 756.

      Cited. 38 CS 8.