Sec. 36a-498a. Prepaid finance charges; restrictions. Secondary mortgage loan; demand for payment prior to maturity; liability for noncompliance; deed. - Connecticut Statutes

      Sec. 36a-498a. Prepaid finance charges; restrictions. Secondary mortgage loan; demand for payment prior to maturity; liability for noncompliance; deed. (a) No mortgage lender licensee or mortgage correspondent lender licensee under section 36a-489 and no person exempt from licensure under subdivisions (1), (2), (5) and (6) of section 36a-487 making a first mortgage loan may charge, impose or cause to be paid, directly or indirectly, prepaid finance charges that exceed in the aggregate, the greater of five per cent of the principal amount of the loan or two thousand dollars. If the proceeds of the loan are used to refinance an existing loan, the aggregate of the prepaid finance charges for the current refinancing and any previous financings by such licensee or exempt person or affiliate of such licensee or exempt person within two years of the current refinancing shall not exceed the greater of five per cent of the principal amount of the initial loan or two thousand dollars. The provisions of this section shall not prohibit such licensee or exempt person from charging, imposing or causing to be paid, directly or indirectly, prepaid finance charges in addition to those permitted by this section in connection with any additional proceeds received by the borrower in the refinancing, provided such prepaid finance charges on the additional proceeds shall not exceed five per cent of the additional proceeds.

      (b) (1) No mortgage lender or mortgage correspondent lender making a secondary mortgage loan may (A) charge, impose or cause to be paid, directly or indirectly, in connection with any secondary mortgage loan transaction, prepaid finance charges that exceed in the aggregate eight per cent of the principal amount of the loan, or (B) include in the loan agreement, under which prepaid finance charges have been assessed, any provision that permits the mortgage lender or mortgage correspondent lender to demand payment of the entire loan balance prior to the scheduled maturity, except that such loan agreement may contain a provision that permits the mortgage lender or mortgage correspondent lender to demand payment of the entire loan balance if any scheduled installment is in default for more than sixty days or if any condition of default set forth in the mortgage note exists.

      (2) Any mortgage lender, mortgage correspondent lender or mortgage broker who fails to comply with the provisions of this subsection shall be liable to the borrower in an amount equal to the sum of: (A) The amount by which the total of all prepaid finance charges exceeds eight per cent of the principal amount of the loan; (B) eight per cent of the principal amount of the loan or two thousand five hundred dollars, whichever is less; and (C) the costs incurred by the borrower in bringing an action under this subsection, including reasonable attorney's fees, as determined by the court, provided no such mortgage lender, mortgage correspondent lender or mortgage broker shall be liable for more than the amount specified in this subsection in a secondary mortgage loan transaction involving more than one borrower.

      (c) For purposes of this section, "additional proceeds" has the same meaning as provided in subdivision (3) of section 36a-746e and "prepaid finance charge" has the same meaning as provided in subdivision (7) of section 36a-746a.

      (d) Any mortgage deed to secure a secondary mortgage loan that is recorded in the land records of any town shall contain the word "Mortgage" in the heading, either in capital letters or underscored and shall contain the principal amount of the loan.

      (P.A. 01-34, S. 13; P.A. 04-69, S. 11; P.A. 06-45, S. 6: P.A. 07-156, S. 15; P.A. 08-176, S. 31, 54.)

      History: P.A. 04-69 substituted Subdiv. "(7)" for "(6)" in definition of "prepaid finance charge"; P.A. 06-45 included in prohibition against lenders charging borrowers excessive prepaid finance charges, persons making five or fewer first mortgage loans within any period of 12 consecutive months, effective May 8, 2006; P.A. 07-156 inserted "mortgage lender or first mortgage broker" re licensee, effective September 30, 2008; P.A. 08-176 changed effective date of P.A. 07-156, S. 15, from September 30, 2008, to July 1, 2008, designated existing provisions as Subsec. (a) and amended same to add "mortgage correspondent lender licensee", make a technical change and delete definitions of "additional proceeds" and "prepaid finance charge", added said definitions as Subsec. (c), added Subsec. (b) re secondary mortgage loan and added Subsec. (d) re mortgage deed to secure a secondary mortgage loan, effective July 1, 2008.