US Laws, Codes, Statutes & Cases

      Sec. 36a-746c. Prohibited provisions in loan agreement. A high cost home loan shall not provide for or include the following:

      (1) For a loan with a term of less than seven years, a payment schedule with regular periodic payments that when aggregated do not fully amortize the outstanding principal balance, except that this limitation does not apply to a loan with maturities of less than one year if the purpose of the loan is a bridge loan, as used in 12 CFR 226.32, as from time to time amended, connected with the acquisition or construction of a dwelling intended to become the borrower's principal dwelling;

      (2) A payment schedule with regular periodic payments that cause the principal balance to increase;

      (3) A payment schedule that consolidates more than two periodic payments and pays them in advance from the proceeds, unless such payments are required to be escrowed by a governmental agency;

      (4) An increase in the interest rate after default or default charges in excess of five per cent of the amount in default;

      (5) A refund calculated by a method less favorable than the actuarial method, as defined by Section 933(d) of the Housing and Community Development Act of 1992, 15 USC 1615(d), as from time to time amended, for rebates of interest arising from a loan acceleration due to default;

      (6) A prepayment penalty except as allowed by this subdivision. A high cost home loan may provide for or include a prepayment penalty, including a refund calculated according to the rule of 78s, as such term is used in 12 CFR 226.32, as from time to time amended, if:

      (A) The penalty can be exercised only for the first three years following consummation. No prepayment penalty shall exceed three per cent of the balance prepaid for any payment occurring earlier than one year after consummation of the loan, two per cent of the balance prepaid for any payment occurring between one and two years after consummation of the loan, and one per cent of the balance prepaid for any payment occurring between two and three years after consummation of the loan;

      (B) The source of the prepayment funds is not a refinancing by the lender or an affiliate of the lender; and

      (C) At consummation, the borrower's total monthly debts, including amounts owed under the high cost home loan, do not exceed fifty per cent of the borrower's monthly gross income, as verified by the borrower's signed financial statement, a credit report and payment records for employment income;

      (7) A mandatory arbitration clause or a waiver of participation in a class action; or

      (8) A call provision that permits the lender, in its sole discretion, to accelerate the indebtedness. This prohibition shall not apply when repayment of the loan is accelerated by bona fide default, pursuant to a due-on-sale clause provision, or pursuant to another provision of the loan agreement unrelated to the payment schedule including, but not limited to, bankruptcy or receivership.

      (P.A. 01-34, S. 5; P.A. 02-12, S. 2.)

      History: P.A. 02-12 amended Subdivs. (1) and (6) by adding "as from time to time amended" and amended Subdiv. (3) by adding "unless such payments are required to be escrowed by a governmental agency", effective April 22, 2002.