Connecticut General Statutes 36a-457b – Mortgage loans to members
(a) Subject to the requirements of this section, a Connecticut credit union may make one or more mortgage loans to its members. As used in this section, the term “mortgage loan” means a closed-end loan or line of credit secured wholly or substantially by a lien on or interest in real estate, including a leasehold interest, and which is secured by a one-to-four family residence that is used as a personal residence of a member. As used in this section and section 36a-458a, the term “real estate” includes land and any structure and other improvement or equipment that is permanently attached to such land or structure. The term “mortgage loan” shall not include a member business loan, as defined in section 36a-458a.
Terms Used In Connecticut General Statutes 36a-457b
- Appraisal: A determination of property value.
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Commissioner: means the Banking Commissioner and, with respect to any function of the commissioner, includes any person authorized or designated by the commissioner to carry out that function. See Connecticut General Statutes 36a-2
- Company: means any corporation, joint stock company, trust, association, partnership, limited partnership, unincorporated organization, limited liability company or similar organization, but does not include (A) any corporation the majority of the shares of which are owned by the United States or by any state, or (B) any trust which by its terms shall terminate within twenty-five years or not later than twenty-one years and ten months after the death of beneficiaries living on the effective date of the trust. See Connecticut General Statutes 36a-2
- Connecticut credit union: means a cooperative, nonprofit financial institution that (A) is organized under chapter 667 and the membership of which is limited as provided in section 36a-438a, (B) operates for the benefit and general welfare of its members with the earnings, benefits or services offered being distributed to or retained for its members, and (C) is governed by a volunteer board of directors elected by and from its membership. See Connecticut General Statutes 36a-2
- Contract: A legal written agreement that becomes binding when signed.
- Deed: The legal instrument used to transfer title in real property from one person to another.
- Foreclosure: A legal process in which property that is collateral or security for a loan may be sold to help repay the loan when the loan is in default. Source: OCC
- Governing board: means the group of persons vested with the management of the affairs of a financial institution irrespective of the name by which such group is designated. See Connecticut General Statutes 36a-2
- Guarantor: A party who agrees to be responsible for the payment of another party's debts should that party default. Source: OCC
- Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
- Lien: A claim against real or personal property in satisfaction of a debt.
- Loan: includes any line of credit or other extension of credit. See Connecticut General Statutes 36a-2
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Mortgage loan: A loan made by a lender to a borrower for the financing of real property. Source: OCC
- Person: means an individual, company, including a company described in subparagraphs (A) and (B) of subdivision (12) of this section, or any other legal entity, including a federal, state or municipal government or agency or any political subdivision thereof. See Connecticut General Statutes 36a-2
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
- State: means any state of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the trust territory of the Pacific Islands, the Virgin Islands and the Northern Mariana Islands. See Connecticut General Statutes 36a-2
(b) A satisfactory certificate of title issued by a qualified person approved by the Connecticut credit union, or a satisfactory policy of title insurance, shall be filed with the lending Connecticut credit union until the mortgage loan is paid or sold.
(c) The real estate shall be appraised or otherwise suitably evaluated before any mortgage loan is made on its security, by one or more suitable persons who are familiar with real estate values in the community where the real estate is located. Such persons shall be approved by the governing board of the Connecticut credit union making the loan, or any board-appointed committee or person appropriately designated by such governing board in accordance with the loan and insider policies of the Connecticut credit union, provided if the loan under consideration is a loan to be insured or guaranteed by a governmental agency, the appraiser may be one who appraised the real estate for the governmental agency. Such appraisal or evaluation shall be in writing, state the amount at which the real estate has been appraised or evaluated and be filed with the lending Connecticut credit union until the loan is paid or sold.
(d) For the purposes of this subsection, the net equity value of real estate is the appraised value determined pursuant to this subsection, reduced by the value of any prior liens or encumbrances with the exception of leases, easements and reservations to the United States of fissionable materials. A mortgage loan made by a Connecticut credit union may not exceed in amount ninety per cent of the net equity value of the real estate except:
(1) Loans guaranteed or insured by the United States government or its agencies, provided the amount of the guaranty or insurance is at least equal to the portion of the loan that exceeds the loan-to-value limit;
(2) Loans backed by the full faith and credit of a state government, provided the amount of the assurance is at least equal to the portion of the loan that exceeds the loan-to-value limit;
(3) Loans guaranteed or insured by a state, municipal or local government, or its agency, provided (A) the amount of the guaranty or insurance is at least equal to the portion of the loan that exceeds the loan-to-value limit, and (B) the Connecticut credit union has determined that the guarantor or insurer has the financial capacity and willingness to perform under the terms of the guaranty or insurance agreement;
(4) Loans that are renewed, refinanced or restructured without the advancement of new funds or an increase in a line of credit, except for reasonable closing costs;
(5) Loans that are renewed, refinanced or restructured in connection with workout situations involving existing loans from the Connecticut credit union to its members, either with or without the advancement of new funds, where such action is consistent with safe and sound lending practices and is a part of a clearly defined and well documented program to achieve orderly liquidation of the debt, reduce risk of loss or maximize recovery of the loan;
(6) Loans that facilitate the sale of real estate acquired by the Connecticut credit union in the ordinary course of collecting a debt previously contracted in good faith; and
(7) Loans where all or part of such loan is made in primary reliance upon the mortgage insurance policy of a private mortgage guaranty company, licensed by the Insurance Commissioner to do business in this state and approved by the commissioner.
(e) A mortgage loan made by a Connecticut credit union secured by a first lien or interest shall have a maturity not exceeding forty-two years from the date of its making, and a mortgage loan to finance a manufactured home or secured by a subordinate lien shall have a maturity not exceeding twenty-five years from the date of its making. For purposes of this subsection, the term “manufactured home” means a movable dwelling containing living facilities suitable for year-round occupancy by one family, including permanent provision for eating, sleeping, cooling and sanitation, provided such dwelling is to be maintained as a residence of the purchaser and will, within ninety days after purchase, be located at a manufactured housing community or other semipermanent site within this state.
(f) A mortgage loan made by a Connecticut credit union shall require repayment of principal and payment of interest in at least consecutive semiannual installments of principal and interest, such payments to be sufficient to pay the loan in full not later than forty-two years from the date of the first payment and the first payment to be made within twenty-four months from the date of the note. The requirements for semiannual principal payments pursuant to this subsection are not applicable to: (1) Consumer revolving loan agreements made pursuant to subsection (c) of section 49-2, (2) alternative mortgage loans made pursuant to section 36a-265, (3) loans that may be demanded at any time and that are secured by residential real estate, and (4) any other loan or class of loans determined by the commissioner not to be subject to such requirements.
(g) A Connecticut credit union may make a mortgage loan secured by a first lien or interest for the construction or repair of buildings or other improvements on the property of the borrower, which loan may be made in installments advanced at the discretion of the credit union as the work progresses, provided at no time shall the ratio of the amount loaned to the then total value exceed fifty per cent or the ratio the final loan is to bear to the value of the completed real estate, whichever is the greater. Loans made to finance the construction of buildings and having a maturity of not more than twenty-four months or having a maturity of not more than thirty-six months, if approved by the commissioner, are not subject to the limitations imposed by subsection (f) of this section.
(h) Attorneys’ fees in connection with any mortgage loan made by a Connecticut credit union, including preparation of the mortgage deed and note, title search, waivers and closing fees or recording fees, shall be paid by the borrower unless otherwise determined by the credit union.
(i) A Connecticut credit union may make and invest in any mortgage loan, including construction and improvement loans, insured by the Federal Housing Administration without regard to the limitations and restrictions of this section, except that such loans are subject to the following limitations: (1) In the case of loans secured by a first mortgage on real estate, the contract of insurance shall contain a provision that the debentures to be issued by the Federal Housing Administration in settlement of such insurance, in the event of the foreclosure or default of any such loan or mortgage, shall be fully guaranteed as to payment of principal and interest by the government of the United States, (2) if the credit union has a commitment for such insurance, issued by the Federal Housing Administration, it may grant a loan to a borrower for the purpose of building upon or improving the real estate of the borrower, the money so borrowed to be advanced at the discretion of the credit union in installments as the work progresses, provided the total of all advances made does not exceed eighty per cent of the value of the real estate on the date of each advance or the proportion that the final loan is to bear to the final estimated value of the real estate, whichever is the greater, except that the final advance may be in such an amount that the total of all advances made may equal but not exceed the amount of such commitment. The final advance shall not be made until the buildings or improvements have been inspected and approved by the Federal Housing Administration for an insured loan.
(j) Without regard to the limitations and restrictions of this section, a Connecticut credit union may make and invest in any mortgage loan which the Administrator of Veterans’ Affairs guarantees, makes a commitment to guarantee or insures.
(k) A Connecticut credit union may make a mortgage loan secured by a leasehold interest, provided the leasehold estate has a term which does not expire prior to the maturity of the mortgage loan. The term of the leasehold estate shall not include any period for which the lease may grant an option of renewal.
(l) A Connecticut credit union may invest its funds in mortgage loans which do not conform to the requirements of this section, provided the governing board or a board-appointed committee has reviewed the nonconforming aspects of the particular mortgage loan or mortgage loan program and has determined such loan or program to be prudent under the circumstances and all such mortgage loans outstanding at the time of origination do not exceed eight per cent of the total assets of the Connecticut credit union. The Connecticut credit union shall make a notation of the determination of whether such loan or program is prudent and the reasons for such determination in the applicable loan file. A loan which was included within the percentage of total assets limitation of this subsection subsequently may be excluded if the loan is repaid or if the nonconforming aspects are eliminated or otherwise cease to exist.