2011 Connecticut Code
Title 36a The Banking Law of Connecticut
Chapter 668 Nondepository Financial Institutions
Sec. 36a-492. (Formerly Sec. 36-440g). Surety bond required. Cancellation of bond. Automatic suspension of license. Notices.

      Sec. 36a-492. (Formerly Sec. 36-440g). Surety bond required. Cancellation of bond. Automatic suspension of license. Notices. (a)(1) No mortgage lender, mortgage correspondent lender or mortgage broker license, and no renewal thereof, shall be granted unless the applicant has filed a bond with the commissioner written by a surety authorized to write such bonds in this state, in the sum of forty thousand dollars, the form of which shall be approved by the Attorney General. Effective July 31, 2010, the penal sum of the bond shall be maintained in an amount that reflects the dollar amount of the loans originated by the mortgage lender, mortgage correspondent lender or mortgage broker, as determined by the commissioner.

      (2) Effective July 31, 2010, each person licensed as a mortgage loan originator shall be covered by a surety bond in accordance with this section, provided such coverage shall be provided through the bond of the mortgage lender, mortgage correspondent lender or mortgage broker who sponsors such mortgage loan originator. The penal sum of the bond shall be maintained in an amount that reflects the dollar amount of loans originated by the mortgage loan originator, as determined by the commissioner. The commissioner may adopt regulations in accordance with chapter 54 with respect to the requirements for such surety bonds.

      (b) The bond required by subsection (a) of this section shall be conditioned upon such licensee and, effective July 31, 2010, any mortgage loan originator who is covered by the surety bond of a mortgage lender, mortgage correspondent lender or mortgage broker, faithfully performing any and all written agreements or commitments with or for the benefit of borrowers and prospective borrowers, truly and faithfully accounting for all funds received from a borrower or prospective borrower by the licensee in the licensee's capacity as a mortgage lender, mortgage correspondent lender or a mortgage broker or, effective July 31, 2010, a mortgage loan originator, and conducting such mortgage business consistent with the provisions of sections 36a-485 to 36a-498f, inclusive, 36a-534a and 36a-534b. Any borrower or prospective borrower who may be damaged by failure to perform any written agreements or commitments, or by the wrongful conversion of funds paid by a borrower or prospective borrower to a licensee, may proceed on such bond against the principal or surety thereon, or both, to recover damages. Commencing August 1, 2009, any borrower or prospective borrower who may be damaged by a mortgage lender, mortgage correspondent lender, mortgage broker or mortgage loan originator licensee's failure to satisfy a judgment against the licensee arising from the making or brokering of a nonprime home loan, as defined in section 36a-760, may proceed on such bond against the principal or surety thereon, or both, to recover the amount of the judgment. The commissioner may proceed on such bond against the principal or surety thereon, or both, to collect any civil penalty imposed upon the licensee pursuant to subsection (a) of section 36a-50 and any unpaid costs of examination of the licensee as determined pursuant to section 36a-65. The proceeds of the bond, even if commingled with other assets of the licensee, shall be deemed by operation of law to be held in trust for the benefit of such claimants against the licensee in the event of bankruptcy of the licensee and shall be immune from attachment by creditors and judgment creditors. The bond shall run concurrently with the period of the license granted to the applicant, and the aggregate liability under the bond shall not exceed the penal sum of the bond. The licensee shall notify the commissioner of the commencement of an action on the licensee's bond. When an action is commenced on a licensee's bond, the commissioner may require the filing of a new bond and immediately on recovery on any action on the bond, the licensee shall file a new bond.

      (c) The surety company shall have the right to cancel the bond at any time by a written notice to the licensee stating the date cancellation shall take effect. Such notice shall be sent by certified mail to the licensee at least thirty days prior to the date of cancellation. A surety bond shall not be cancelled unless the surety company notifies the commissioner in writing not less than thirty days prior to the effective date of cancellation. After receipt of such notification from the surety company, the commissioner shall give written notice to the licensee of the date such bond cancellation shall take effect. The commissioner shall automatically suspend the license on such date, unless the licensee prior to such date submits a letter of reinstatement of the bond from the surety company or a new bond or the licensee has ceased business and has surrendered the license in accordance with subsection (a) of section 36a-490. After a license has been automatically suspended, the commissioner shall give the licensee notice of the automatic suspension, proceedings pursuant to section 36a-494 and an opportunity for a hearing on such action in accordance with section 36a-51 and require the licensee to take or refrain from taking such action as in the opinion of the commissioner will effectuate the purposes of this section.

      (P.A. 85-399, S. 8; P.A. 89-347, S. 15; P.A. 90-277; P.A. 94-122, S. 235, 340; P.A. 99-36, S. 28; P.A. 02-111, S. 9; P.A. 04-69, S. 7; P.A. 07-156, S. 10; P.A. 08-176, S. 31, 46, 47; P.A. 09-208, S. 5; 09-209, S. 12.)

      History: P.A. 89-347 extended the application of the section to mortgage brokers; P.A. 90-277 reduced the required bond sum from $50,000 to $40,000; P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-440g transferred to Sec. 36a-492 in 1995; P.A. 99-36 made technical changes; P.A. 02-111 added provision re performance "for the benefit" of borrowers and prospective borrowers, changed any "person" to any "borrower or perspective borrower", added provisions re commissioner to proceed on bond to collect civil penalty imposed pursuant to Sec. 36a-50(a) and re bond proceeds deemed to be held in trust and immune from attachment, and made conforming and technical changes; P.A. 04-69 designated existing provisions as Subsec. (a), substituting "36a-498a" for "36a-498" therein, and added Subsec. (b) giving surety company the right to cancel the bond at any time by written notice to licensee, specifying manner of notice, requiring surety company to notify commissioner in writing prior to cancellation, requiring commissioner to automatically suspend license on date cancellation takes effect, unless bond has been replaced or renewed, and requiring commissioner to give licensee notice of automatic suspension pending proceedings for revocation or refusal to renew and an opportunity for a hearing in accordance with Sec. 36a-51; P.A. 07-156 amended Subsec. (a) to insert "mortgage lender or first mortgage broker" re license, effective September 30, 2008; P.A. 08-176 changed effective date of P.A. 07-156, S. 10, from September 30, 2008, to July 1, 2008, amended Subsec. (a) to add "mortgage correspondent lender", to increase amount of bond to $80,000 on and after August 1, 2009, to add provision, commencing August 1, 2009, for borrower or prospective borrower of nonprime home loan to proceed on bond to recover amount of judgment, to allow commissioner to proceed on bond to collect any unpaid costs of examination of licensee and to make conforming changes, and amended Subsec. (b) to delete provision re automatic suspension of license when bond is cancelled, effective July 1, 2008; P.A. 09-208 amended Subsec. (b) by adding provisions re automatic suspension of license and opportunity for hearing upon cancellation of bond; P.A. 09-209 amended Subsec. (a) by designating existing provisions as Subdiv. (1), deleting provisions re conditions of surety bond and proceeding on bonds, adding provision re penal sum of bond reflecting dollar amount of loans originated by lender or broker as determined by commissioner and adding Subdiv. (2) re surety bonds for originators, added new Subsec. (b) re conditions of surety bond and proceeding on bonds and redesignated existing Subsec. (b) as Subsec. (c), effective July 31, 2009.