Connecticut General Statutes
Chapter 668 - Nondepository Financial Institutions
Section 36a-498. (Formerly Sec. 36-440m). - Refundability of advance fees. Exceptions. Prohibited acts by mortgage lenders, correspondent lenders, brokers and loan originators re borrowers.

(a) Except as provided in subsection (c) of this section, every advance fee paid or given, directly or indirectly, to a mortgage lender, mortgage correspondent lender or mortgage broker required to be licensed pursuant to sections 36a-485 to 36a-498e, inclusive, 36a-534a and 36a-534b shall be refundable.

(b) No mortgage loan originator required to be licensed pursuant to sections 36a-485 to 36a-498e, inclusive, 36a-534a and 36a-534b shall accept payment of any advance fee except an advance fee on behalf of a mortgage lender, mortgage correspondent lender or mortgage broker licensee. Nothing in this subsection shall be construed as prohibiting the mortgage lender, mortgage correspondent lender or mortgage broker licensee from paying a mortgage loan originator all or part of an advance fee, provided such advance fee paid is not refundable under this section.
(c) Subsection (a) of this section shall not apply if: (1) The person providing the advance fee and the mortgage lender, mortgage correspondent lender or mortgage broker agree in writing that the advance fee shall not be refundable, in whole or in part; and (2) the written agreement complies in all respects with the provisions of subsection (d) of this section.
(d) An agreement under subsection (c) of this section shall meet all of the following requirements to be valid and enforceable: (1) The agreement shall be dated, signed by both parties, and be executed prior to the payment of any advance fee; (2) the agreement shall expressly state the total advance fee required to be paid and any amount of the advance fee that shall not be refundable; (3) the agreement shall clearly and conspicuously state any conditions under which the advance fee will be retained by the mortgage lender, mortgage correspondent lender or mortgage broker; (4) the term “nonrefundable” shall be used to describe each advance fee or portion thereof to which the term is applicable, and shall appear in boldface type in the agreement each time it is used; and (5) the form of the agreement shall (A) be separate from any other forms, contracts, or applications utilized by the mortgage lender, mortgage correspondent lender or mortgage broker, (B) contain a heading in a size equal to at least ten-point boldface type that shall title the form “AGREEMENT CONCERNING NONREFUNDABILITY OF ADVANCE FEE”, (C) provide for a duplicate copy which shall be given to the person paying the advance fee at the time of payment of the advance fee, and (D) include such other specifications as the commissioner may by regulation prescribe.
(e) An agreement under subsection (c) of this section that does not meet the requirements of subsection (d) of this section shall be voidable at the election of the person paying the advance fee.
(f) (1) No mortgage lender, mortgage correspondent lender or mortgage broker required to be licensed pursuant to sections 36a-485 to 36a-498e, inclusive, 36a-534a and 36a-534b shall enter into an agreement with or otherwise require any person to pay the mortgage lender, mortgage correspondent lender or mortgage broker for any fee, commission or other valuable consideration lost as a result of such person failing to consummate a residential mortgage loan, provided the mortgage lender, mortgage correspondent lender or mortgage broker may collect such fee, commission or consideration as an advance fee subject to the requirements of this section.
(2) No mortgage broker required to be licensed pursuant to sections 36a-485 to 36a-498e, inclusive, 36a-534a and 36a-534b shall enter into an agreement with or otherwise require any person to pay the mortgage broker any fee, commission or other valuable consideration for the prepayment of the principal of a residential mortgage loan by such person before the date on which the principal is due.
(g) (1) For the purposes of this subsection:
(A) “Unfair or deceptive act or practice” means (i) the failure to clearly and conspicuously state in the initial phase of the solicitation that the solicitor is not affiliated with the mortgage lender, mortgage correspondent lender or mortgage broker with which the consumer initially applied, (ii) the failure to clearly and conspicuously state in the initial phase of the solicitation that the solicitation is based on personal information about the consumer that was purchased, directly or indirectly, from a consumer reporting agency without the knowledge or permission of the mortgage lender, mortgage correspondent lender or mortgage broker with which the consumer initially applied, (iii) the failure in the initial solicitation to comply with the provisions of the federal Fair Credit Reporting Act relating to prescreening solicitations that use consumer reports, including the requirement to make a firm offer of credit to the consumer, or (iv) knowingly or negligently using information from a mortgage trigger lead (I) to solicit consumers who have opted out of prescreened offers of credit under the federal Fair Credit Reporting Act, or (II) to place telephone calls to consumers who have placed their contact information on a federal or state Do Not Call list; and
(B) “Mortgage trigger lead” means a consumer report obtained pursuant to Section 604(c)(1)(B) of the federal Fair Credit Reporting Act, 15 USC 1681b, where the issuance of the report is triggered by an inquiry made with a consumer reporting agency in response to an application for credit. “Mortgage trigger lead” does not include a consumer report obtained by a mortgage lender or mortgage correspondent lender that holds or services existing indebtedness of the applicant who is the subject of the report.
(2) No mortgage lender, mortgage correspondent lender, mortgage broker or mortgage loan originator shall engage in an unfair or deceptive act or practice in soliciting an application for a residential mortgage loan when such solicitation is based, in whole or in part, on information contained in a mortgage trigger lead. Any violation of this subsection shall be deemed an unfair or deceptive trade practice under subsection (a) of section 42-110b.
(h) No mortgage lender or mortgage correspondent lender shall include in a residential mortgage loan for which an application is received by such lender on or after October 1, 2009, a provision that increases the interest rate as a result of a default other than a failure to comply with a provision to maintain an automatic electronic payment feature where such maintenance provision has been provided in return for an interest rate reduction and the increase is no greater than such reduction.
(P.A. 92-132, S. 4, 5; P.A. 94-122, S. 239, 340; P.A. 02-111, S. 14; P.A. 04-69, S. 10; P.A. 06-45, S. 5; P.A. 07-118, S. 1; 07-156, S. 14; P.A. 08-176, S. 31, 53; P.A. 09-207, S. 6; 09-209, S. 17; Sept. Sp. Sess. P.A. 09-7, S. 100; P.A. 11-216, S. 23; P.A. 18-173, S. 17.)
History: P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-440m transferred to Sec. 36a-498 in 1995; P.A. 02-111 replaced references to “mortgage broker” with references to “first mortgage broker” throughout, added new Subsec. (b) re acceptance of advance fee by originator, redesignated existing Subsecs. (b) to (d) as Subsecs. (c) to (e) and made technical changes throughout; P.A. 04-69 amended Subsecs. (a) and (b) to substitute “36a-498a” for “36a-498”; P.A. 06-45 added Subsec. (f) to prohibit mortgage lenders and first mortgage brokers from entering into agreements with borrowers to compensate licensees for fees, commissions or other valuable consideration lost if borrowers fail to close loan unless compensation is collected as advance fee and to prohibit first mortgage brokers from imposing fees, commissions or other valuable consideration on borrowers for prepayment of principal of loan, effective May 8, 2006; P.A. 07-118 added Subsec. (g) to define “unfair or deceptive act or practice” and “mortgage trigger lead”, to prohibit mortgage lenders and first mortgage brokers from engaging in an unfair or deceptive act or practice in soliciting application for a first mortgage loan if solicitation is based in any way on a mortgage trigger lead, and to provide that violation is deemed an unfair or deceptive trade practice under Sec. 42-110b(a); P.A. 07-156 amended Subsec. (b) to substitute “licensed” for “registered” and to insert “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. 14, from September 30, 2008, to July 1, 2008, added references to “mortgage correspondent lender” and “mortgage loan originator” and made conforming changes, effective July 1, 2008; P.A. 09-207 added Subsec. (h) re prohibition against mortgage loan provisions that increase interest rate as result of default other than failure to comply with provision to maintain an automatic electronic payment feature; P.A. 09-209 changed “mortgage loan” to “residential mortgage loan” in Subsecs. (f) and (g)(2) and inserted references to other licensing provisions in Subsecs. (a), (b) and (f), effective July 31, 2009; Sept. Sp. Sess. P.A. 09-7 amended Subsec. (h) to add “for which an application is received by such lender on or after October 1, 2009”, effective October 5, 2009; P.A. 11-216 amended Subsec. (h) to add “residential” re mortgage loan, effective July 13, 2011; P.A. 18-173 replaced references to Sec. 36a-498f with references to Sec. 36a-498e.

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