Bill Text: CT HB05352 | 2014 | General Assembly | Introduced

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Bill Title: An Act Concerning Mortgage Servicers.

Spectrum: Committee Bill

Status: (Introduced - Dead) 2014-02-28 - Public Hearing 03/04 [HB05352 Detail]

Download: Connecticut-2014-HB05352-Introduced.html

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General Assembly		Raised Bill No. 5352
February Session, 2014		LCO No. 1593
		*01593_______BA_*
Referred to Committee on BANKS
Introduced by:
(BA)

AN ACT CONCERNING MORTGAGE SERVICERS.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 36a-715 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2014):

As used in sections 36a-715 to 36a-718, inclusive, as amended by this act, and sections 5 to 16, inclusive, of this act, unless the context otherwise requires:

[(1) "First mortgage loan" has the same meaning as provided in section 36a-485.]

[(2) "Mortgage servicing company"] (1) "Mortgage servicer" (A) means any person, wherever located, who, for such person or on behalf of the holder of a [first] residential mortgage loan, receives payments of principal and interest in connection with a [first] residential mortgage loan, records such payments on such person's books and records and performs such other administrative functions as may be necessary to properly carry out the mortgage holder's obligations under the mortgage agreement including, when applicable, the receipt of funds from the mortgagor to be held in escrow for payment of real estate taxes and insurance premiums and the distribution of such funds to the taxing authority and insurance company, and (B) includes a person who makes payments to borrowers pursuant to the terms of a home equity conversion mortgage or reverse mortgage. "Mortgage servicer" does not include: (i) A person exempt from licensure as a mortgage lender or mortgage correspondent lender pursuant to subsection (b) of section 36a-487 while servicing residential mortgage loans made pursuant to such exemption, (ii) a person servicing five or fewer residential mortgage loans within any period of twelve consecutive months, and (iii) any agency of the federal government, any state or municipal government or any quasi-governmental agency servicing residential mortgage loans under the specific authority of the laws of any state or the United States.

(2) "Mortgagee" means the grantee of a residential mortgage, provided if the residential mortgage has been assigned of record, "mortgagee" means the last person to whom the residential mortgage has been assigned of record.

(3) "Mortgagor" means any person obligated to repay a [first] residential mortgage loan.

(4) "Residential mortgage loan" means any loan primarily for personal, family or household use that is secured by a mortgage, deed of trust or other equivalent consensual security interest on a dwelling, as defined in Section 103 of the Consumer Credit Protection Act, 15 USC 1602, located in this state, or real property located in this state upon which is constructed or intended to be constructed a dwelling.

(5) "System" has the same meaning as provided in section 36a-485.

Sec. 2. Section 36a-716 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2014):

(a) Any mortgage [servicing company which] servicer who receives funds from a mortgagor to be held in escrow for payment of taxes and insurance premiums shall pay the taxes and insurance premiums of the mortgagor to the appropriate taxing authority and insurance company in the amount required and at the time such taxes and insurance premiums are due provided (1) the mortgage [servicing company] servicer has been provided with the tax or insurance bills at least fifteen days prior to the date such taxes and insurance premiums are due, and (2) the mortgagor has paid to the mortgage [servicing company] servicer the amounts required to be paid into the escrow account, as determined by the mortgage [servicing company] servicer, for all amounts scheduled to be paid to the mortgage [servicing company] servicer prior to the date such taxes and insurance premiums are due.

(b) Each mortgage [servicing company] servicer shall, through its own effort and expense, determine and notify the mortgagor of the amounts necessary to be paid into the escrow account to assure that sufficient funds will be available for the payment of such taxes and insurance premiums as of the date such payment is due.

(c) If the amount held in the escrow account as of the date such taxes and insurance premiums are due is insufficient to pay the taxes and insurance premiums despite compliance by the mortgagor with subdivision (2) of subsection (a) of this section, the mortgage [servicing company] servicer shall pay such taxes and insurance premiums from its own funds. The mortgage [servicing company] servicer shall then give the mortgagor the option of paying the shortage over a period of not less than one year. The mortgage [servicing company] servicer shall not charge or collect interest on such shortage during the one-year period.

Sec. 3. Section 36a-717 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2014):

Any mortgage [servicing company which] servicer who violates any provision of section 36a-716, as amended by this act, shall be liable to the mortgagor for: (1) Any penalties, interest or other charges levied by the taxing authority or insurance company as a result of such violation; (2) any actual damages suffered by the mortgagor as a result of such violation, including, but not limited to, any amount which would have been paid by an insurer for a casualty or liability claim had the insurance policy not been cancelled for nonpayment by the mortgage [servicing company] servicer; and (3) in the case of any successful action to enforce the foregoing liability, the costs of the action together with reasonable attorney's fees as determined by the court.

Sec. 4. Section 36a-718 of the general statutes is repealed and the following is substituted in lieu thereof (Effective January 1, 2015):

[If the commissioner determines that any mortgage servicing company has violated any provision of section 36a-716, the commissioner may take action against such mortgage servicing company in accordance with sections 36a-50 and 36a-52. The commissioner may also order the mortgage servicing company to make restitution to the mortgagor upon fourteen days' notice in writing. Such notice shall be sent by certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt, to the principal place of business of the mortgage servicing company and shall state the grounds for the contemplated action. Within fourteen days of receipt of the notice, the mortgage servicing company may file a written request for a hearing. If a hearing is requested, the commissioner shall not issue an order to make restitution until after such hearing is held. Such hearing shall be conducted in accordance with the provisions of chapter 54.]

(a) No person shall act as a mortgage servicer, directly or indirectly, without first obtaining a license under section 5 of this act from the commissioner for its main office and each branch office where such business is conducted, unless such person is exempt from licensure pursuant to subsection (b) of this section.

(b) The following persons are exempt from mortgage servicer licensing requirements: (1) Any bank, out-of-state bank, Connecticut credit union, federal credit union or out-of-state credit union, provided such bank or credit union is federally insured, any operating subsidiary of a federal bank or federally-chartered out-of-state bank or any wholly owned subsidiary of a Connecticut bank or Connecticut credit union; and (2) any person licensed as a mortgage lender in this state while acting as a mortgage servicer from a location licensed as a main office or branch office under sections 36a-485 to 36a-498f, inclusive, 36a-534a and 36a-534b.

Sec. 5. (NEW) (Effective November 1, 2014) (a) The Banking Commissioner shall issue a mortgage servicer license to an applicant for such license if the commissioner finds that: (1) The applicant has identified a qualified individual for its main office and a branch manager for each branch office where such business is conducted; (2) notwithstanding the provisions of section 46a-80 of the general statutes, the applicant, the control persons of the applicant, the qualified individual and any branch manager with supervisory authority at the office for which the license is sought have not been convicted of or plead guilty or nolo contendere to, in a domestic, foreign or military court, a felony during the seven-year period preceding the date of the application for licensing or a felony involving an act of fraud or dishonesty, a breach of trust or money laundering at any time preceding the date of application, provided any pardon or expungement of a conviction shall not be a conviction for purposes of this subdivision; (3) the applicant demonstrates that the financial responsibility, character and general fitness of the applicant, the control persons of the applicant, the qualified individual and any branch manager having supervisory authority over the office for which the license is sought command the confidence of the community and warrant a determination that the applicant will operate honestly, fairly and efficiently within the purposes of sections 36a-715 to 36a-718, inclusive, of the general statutes, as amended by this act, and sections 5 to 16, inclusive, of this act; (4) the applicant has met the surety bond requirement under section 8 of this act; (5) the applicant has not made a material misstatement in the application; and (6) the applicant has met any other similar requirements as determined by the commissioner. If the commissioner fails to make such findings, the commissioner shall not issue a license, and shall notify the applicant of the denial and the reasons for such denial. Any qualified individual and branch manager identified pursuant to subdivision (1) of this subsection shall have supervisory authority over the mortgage servicer activities at the respective office location and at least three years' experience in the mortgage servicing business within the five years immediately preceding the date of the application for licensure. As used in this subsection, "experience in the mortgage servicing business" means paid experience in the servicing of mortgage loans, in the accounting, receipt and processing of payments on behalf of mortgagees or creditors, or in the supervision of such activities, or any other relevant experience as determined by the commissioner. For purposes of this subsection, the level of offense of the crime and the status of any conviction, pardon or expungement shall be determined by reference to the law of the jurisdiction where the case was prosecuted. In the event such jurisdiction does not use the term "felony", "pardon" or "expungement", such terms shall include legally equivalent events.

(b) An application for a license as a mortgage servicer or renewal of such license shall be filed, in a form prescribed by the commissioner, with the system and accompanied by the fees required by section 7 of this act. Each such form shall contain content as set forth by instruction or procedure of the commissioner and may be changed or updated as necessary by the commissioner in order to carry out the purpose of sections 36a-715 to 36a-718, inclusive, of the general statutes, as amended by this act, and sections 6 to 16, inclusive, of this act. The applicant shall, at a minimum, furnish to the system information concerning the identity of the applicant, any control person of the applicant, the qualified individual and any branch manager, including personal history and experience in a form prescribed by the system and information related to any administrative, civil or criminal findings by any governmental jurisdiction. The applicant shall promptly notify the commissioner, in writing, of any change to the information submitted in connection with its application for licensure. For the purpose of this subsection, evidence of experience of the qualified individual and any branch manager shall include: (A) A statement specifying the duties and responsibilities of such person's employment, the term of employment, including month and year, and the name, address and telephone number of a supervisor, employer or, if self-employed, a business reference; and (B) if required by the commissioner, copies of W-2 forms, 1099 tax forms or, if self-employed, 1120 corporate tax returns, signed letters from the employer on the employer's letterhead verifying such person's duties and responsibilities and term of employment including month and year, and, if such person is unable to provide such letters, other proof satisfactory to the commissioner that such person meets the experience requirement. The commissioner may conduct a criminal history records check of the applicant, any control person of the applicant, the qualified individual and any branch manager with supervisory authority at the office for which the license is sought and require the applicant to submit the fingerprints of such persons as part of the application.

(c) (1) The minimum standards for license renewal for a mortgage servicer shall include the following: (A) The applicant continues to meet the minimum standards under subsection (a) of this section; and (B) the mortgage servicer has paid all required fees for renewal of the license.

(2) The license of a mortgage servicer failing to satisfy the minimum standards for license renewal shall expire upon the failure to satisfy such standards. The commissioner may adopt procedures for the reinstatement of expired licenses consistent with the standards established by the system. The commissioner may automatically suspend a mortgage servicer license if the licensee receives a deficiency on the system indicating that the payment required by section 7 of this act was Returned-ACH or returned pursuant to such other term as may be utilized by the system to indicate that the payment was not accepted. After a license has been automatically suspended pursuant to this section, the commissioner shall give such licensee notice of the automatic suspension, pending proceedings for revocation or refusal to renew pursuant to section 15 of this act and an opportunity for a hearing on such action in accordance with section 36a-51 of the general statutes, and require such licensee to take or refrain from taking such action that, in the opinion of the commissioner, will effectuate the purposes of this section.

(d) Withdrawal of an application for a license filed under this section shall become effective upon receipt by the commissioner of a notice of intent to withdraw such application. The commissioner may deny a license up to one year after the effective date of withdrawal.

(e) The commissioner may deem an application for a license under this section abandoned if the applicant fails to respond to any request for information required under sections 36a-715 to 36a-718, inclusive, of the general statutes, as amended by this act, and sections 5 to 16, inclusive, of this act or the regulations adopted pursuant to said sections. The commissioner shall notify the applicant on the system that if such information is not submitted not later than sixty days from the date of such request, the application shall be deemed abandoned. An application filing fee paid prior to the date an application is deemed abandoned pursuant to this subsection shall not be refunded. Abandonment of an application pursuant to this subsection shall not preclude the applicant from submitting a new application for a license.

(f) At least annually, as part of its application, a mortgage servicer shall file with the commissioner (1) a current schedule of the ranges of costs and fees it charges mortgagors for its servicing-related activities; and (2) a report in a form and format acceptable to the commissioner detailing the mortgage servicer's activities in the state, including (A) the number of residential mortgage loans the mortgage servicer is servicing, (B) the type and characteristics of the residential mortgage loans in this state, (C) the number of serviced residential mortgage loans in default, along with a breakdown of thirty-day, sixty-day and ninety-day delinquencies, (D) information on loss mitigation activities, including details on workout arrangements undertaken, and (E) information on foreclosures commenced in this state.

Sec. 6. (NEW) (Effective November 1, 2014) (a) A mortgage servicer license shall not be transferable or assignable. No licensee may use any name other than its legal name or a fictitious name approved by the Banking Commissioner, provided such licensee may not use its legal name if the commissioner disapproves use of such name. Any licensee who intends to permanently cease acting as a mortgage servicer at any time during a license period for any cause, including, but not limited to, bankruptcy or voluntary dissolution, shall file a request to surrender the license for each office at which the licensee intends to cease to do business, on the system, not later than fifteen days after the date of such cessation, provided this requirement shall not apply when a license has been suspended pursuant to section 36a-51 of the general statutes. No surrender shall be effective until accepted by the commissioner.

(b) A mortgage servicer licensee may change the name of the licensee or address of any office specified on the most recent filing with the system if (1) at least thirty calendar days prior to such change, the licensee files such change with the system and, in the case of a main office or branch office, provides, directly to the commissioner, a bond rider or endorsement, or addendum, as applicable, to the surety bond on file with the commissioner that reflects the new name or address of the main office or branch office; and (2) the commissioner does not disapprove such change, in writing, or request further information within such thirty-day period.

(c) The mortgage servicer licensee shall promptly file with the system or, if the information cannot be filed on the system, directly notify the commissioner, in writing, of the occurrence of any of the following events:

(1) Filing for bankruptcy, or the consummation of a corporate restructuring, of the licensee;

(2) Filing of a criminal indictment against the licensee or receiving notification of the filing of any criminal felony indictment or felony conviction of any of the licensee's officers, directors, members, partners or shareholders owning ten per cent or more of the outstanding stock;

(3) Receiving notification of the institution of license denial, cease and desist, suspension or revocation procedures, or other formal or informal regulatory action by any governmental agency against the licensee and the reasons for such action;

(4) Receiving notification of the initiation of any action by the Attorney General or the attorney general of any other state and the reasons for such action;

(5) Suspension or termination of the licensee's status as an approved seller or servicer by the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation or Government National Mortgage Association;

(6) Receiving notification that certain servicing rights of the licensee will be rescinded or cancelled, and the reasons provided therefor;

(7) Receiving notification of filing for bankruptcy of any of the licensee's officers, directors, members, partners or shareholders owning ten per cent or more of the outstanding stock of the licensee;

(8) Receiving notification of the initiation of a class action lawsuit on behalf of consumers against the licensee that is related to the operation of the licensed business; or

(9) Any change in the information most recently submitted by the licensee in connection with its application.

Sec. 7. (NEW) (Effective November 1, 2014) (a) Each mortgage servicer license shall expire at the close of business on December thirty-first of the year in which it is approved, unless such license is renewed, and provided any such license that is approved on or after November first shall expire at the close of business on December thirty-first of the year following the year in which it is approved. An application for renewal of a license shall be filed between November first and December thirty-first of the year in which the license expires. Each applicant for an initial license or renewal of a license as a mortgage servicer shall pay to the system any required fees or charges and a license fee of one thousand dollars.

(b) All fees paid pursuant to this section, including fees paid in connection with an application that is denied or withdrawn prior to the issuance of the license, shall be nonrefundable. No fee paid pursuant to this section shall be prorated if the license is surrendered, revoked or suspended prior to the expiration of the period for which it was approved.

Sec. 8. (NEW) (Effective November 1, 2014) (a) No mortgage servicer license and no renewal thereof shall be granted unless the applicant or licensee has filed with the Banking Commissioner a single surety bond, written by a surety authorized to write such bonds in this state covering its main office and any branch office, in a penal sum of one hundred thousand dollars.

(b) The bond required by subsection (a) of this section shall be (1) in a form approved by the Attorney General; and (2) conditioned upon the mortgage servicer licensee faithfully performing any and all written agreements or commitments with or for the benefit of mortgagors and mortgagees, truly and faithfully accounting for all funds received from a mortgagor or mortgagee by the licensee in the licensee's capacity as a mortgage servicer, and conducting such mortgage business consistent with the provisions of sections 36a-715 to 36a-718, inclusive, of the general statutes, as amended by this act, and sections 5 to 16, inclusive, of this act. Any mortgagor or mortgagee that may be damaged by a mortgage servicer licensee's failure to perform any written agreements or commitments, or by the wrongful conversion of funds paid by a mortgagor or a mortgagee to a licensee, may proceed on such bond against the principal or surety thereon, or both, to recover damages. The commissioner may proceed on such bond against the principal or surety on such bond, or both, to collect any civil penalty imposed upon a licensee pursuant to subsection (a) of section 36a-50 of the general statutes and any unpaid costs of examination of a licensee as determined pursuant to section 36a-65 of the general statutes, as amended by this act. The proceeds of the bond, even if commingled with other assets of the principal, shall be deemed by operation of law to be held in trust for the benefit of such claimants against the principal in the event of bankruptcy of the principal and shall be immune from attachment by creditors and judgment creditors. The bond shall run concurrently with the period of the license for the main office and the aggregate liability under the bond shall not exceed the penal sum of the bond. The principal shall notify the commissioner of the commencement of an action on the bond. When an action is commenced on a principal's bond, the commissioner may require the filing of a new bond and immediately on recovery on any action on the bond, the principal 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 principal stating the date cancellation shall take effect. Such notice shall be sent by certified mail to the principal 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 principal of the date such bond cancellation shall take effect. The commissioner shall automatically suspend the license of a mortgage servicer on such date. No automatic suspension or inactivation shall occur if, prior to the date that the bond cancellation shall take effect, (1) the principal submits a letter of reinstatement of the bond from the surety company or a new bond; or (2) the mortgage servicer licensee has ceased business in this state and has surrendered all licenses in accordance with section 36a-51 of the general statutes and section 6 of this act. After a mortgage servicer license has been automatically suspended pursuant to this section, the commissioner shall give such licensee notice of the automatic suspension, pending proceedings for revocation or refusal to renew pursuant to section 15 of this act and an opportunity for a hearing on such action in accordance with section 36a-51 of the general statutes and require such licensee to take or refrain from taking such action as in the opinion of the commissioner will effectuate the purposes of this section.

Sec. 9. (NEW) (Effective November 1, 2014) (a) Each mortgage servicer licensee shall maintain adequate records of each residential mortgage loan transaction at the office named in the license, or, if requested by the Banking Commissioner, shall make such records available at such office or send such records to the commissioner by registered or certified mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt, not later than five business days after requested by the commissioner to do so. Upon request, the commissioner may grant a licensee additional time to make such records available or send them to the commissioner. Such records shall provide the following information: (1) An adequate loan history for residential mortgage loans upon which payments are received or made by the mortgage servicer, itemizing the amount and date of each payment and the unpaid balance at all times; (2) the original or an exact copy of the note, residential mortgage or other evidence of indebtedness and mortgage deed; (3) the name and address of the mortgage lender, mortgage correspondent lender and mortgage broker, if any, involved in the residential mortgage loan transaction; (4) copies of any disclosures or notification provided to the mortgagor required by state or federal law; (5) a copy of any bankruptcy plan approved in a proceeding filed by the mortgagor or a co-owner of the property subject to the residential mortgage loan; (6) a communications log that documents all verbal communication with the mortgagor or the mortgagor's representative; and (7) a copy of all notices sent to the mortgagor related to any foreclosure proceeding filed against the encumbered property.

(b) For each residential mortgage loan that is serviced by a licensee, the licensee shall retain the records of such residential mortgage loan transaction for not less than two years following the final payment on such residential mortgage loan, or the assignment of such residential mortgage loan, whichever occurs first, or such longer period as may be required by any other provision of law. Every licensee shall keep and use in its business those books, accounts and records that will enable the commissioner to determine whether such licensee is complying with the provisions of sections 36a-715 to 36a-718, inclusive, of the general statutes, as amended by this act, and sections 5 to 16, inclusive, of this act and with any regulations adopted pursuant thereto.

Sec. 10. (NEW) (Effective January 1, 2015) Upon assignment of servicing rights on a residential mortgage loan, the mortgage servicer shall disclose to the mortgagor: (1) Any notice required by the Real Estate Settlement Procedures Act of 1974, 12 USC Section 2601 et seq., as from time to time amended, and the regulations promulgated thereunder, and within the time periods prescribed therein; and (2) a schedule of the ranges and categories of its costs and fees for its servicing-related activities, which shall comply with state and federal law and, if such disclosure is made by a mortgage servicer licensee, shall not exceed those reported to the Banking Commissioner in accordance with section 5 of this act.

Sec. 11. (NEW) (Effective January 1, 2015) A mortgage servicer shall comply with all applicable federal laws and regulations relating to mortgage loan servicing, including, but not limited to, the Real Estate Settlement Procedures Act of 1974, 12 USC Section 2601 et seq., the Truth-in-Lending Act, 15 USC Section 1601 et seq., as from time to time amended, and the regulations promulgated thereunder. In addition to any other remedies provided by law, a violation of any such federal law or regulation shall be deemed a violation of this section and a basis upon which the Banking Commissioner may take enforcement action pursuant to section 15 of this act.

Sec. 12. (NEW) (Effective January 1, 2015) (a) A mortgage servicer shall maintain and keep current a schedule of standard or common fees, such as nonsufficient fund fees, that it charges mortgagors. The schedule shall identify each fee, provide a plain English explanation of the fee and state the amount of the fee or range of amounts or, if there is no standard fee, how the fee is calculated or determined. A mortgage servicer shall make its schedule available to the mortgagor or the mortgagor's authorized representative upon request.

(b) A mortgage servicer shall not impose any late fee or delinquency charge when the only delinquency is attributable to late fees or delinquency charges assessed on an earlier payment, and the payment is otherwise a full payment for the applicable period and is paid on its due date or within any applicable grace period. Late charges shall not be (1) based on an amount greater than the past due amount; (2) collected from the escrow account or from escrow surplus without the approval of the mortgagor; or (3) deducted from any regular payment.

Sec. 13. (NEW) (Effective January 1, 2015) No mortgage servicer shall:

(1) Directly or indirectly employ any scheme, device or artifice to defraud or mislead mortgagors or mortgagees or to defraud any person;

(2) Engage in any unfair or deceptive practice toward any person or misrepresent or omit any material information in connection with the servicing of the residential mortgage loan, including, but not limited to, misrepresenting the amount, nature or terms of any fee or payment due or claimed to be due on a residential mortgage loan, the terms and conditions of the servicing agreement or the mortgagor's obligations under the residential mortgage loan;

(3) Obtain property by fraud or misrepresentation;

(4) Use any unfair or unconscionable means in servicing a residential mortgage loan;

(5) Knowingly misapply or recklessly apply residential mortgage loan payments to the outstanding balance of a residential mortgage loan;

(6) Knowingly misapply or recklessly apply payments to escrow accounts;

(7) Place hazard, homeowner's or flood insurance on the mortgaged property when the mortgage servicer knows or has reason to know that the mortgagor has an effective policy for such insurance;

(8) Fail to comply with section 49-10a of the general statutes, charge excessive or unreasonable fees to provide loan payoff information or fail to provide loan payoff information promptly upon receipt of a written request;

(9) Knowingly or recklessly provide inaccurate information to a credit bureau, thereby harming a mortgagor's creditworthiness;

(10) Fail to report both the favorable and unfavorable payment history of the mortgagor to a nationally recognized consumer credit bureau at least annually if the mortgage servicer regularly reports information to a credit bureau;

(11) Collect private mortgage insurance beyond the date for which private mortgage insurance is required;

(12) Knowingly or recklessly facilitate the illegal foreclosure of real property collateral;

(13) Fail to issue a release of mortgage in accordance with section 49-8a of the general statutes;

(14) Fail to provide written notice to a mortgagor upon taking action to place hazard, homeowner's or flood insurance on the mortgaged property, including a clear and conspicuous statement of the procedures by which the mortgagor may demonstrate that he or she has the required insurance coverage and by which the mortgage servicer shall terminate the insurance coverage placed by it and refund or cancel any insurance premiums and related fees paid by or charged to the mortgagor;

(15) Place hazard, homeowner's or flood insurance on a mortgaged property, or require a mortgagor to obtain or maintain such insurance, in excess of the replacement cost of the improvements on the mortgaged property as established by the property insurer;

(16) Fail to provide to the mortgagor a refund of unearned premiums paid by a mortgagor or charged to the mortgagor for hazard, homeowner's or flood insurance placed by a mortgagee or the mortgage servicer if the mortgagor provides reasonable proof that the mortgagor has obtained coverage such that the forced placement insurance is no longer necessary and the property is insured. If the mortgagor provides reasonable proof that no lapse in coverage occurred such that the forced placement was not necessary, the mortgage servicer shall promptly refund the entire premium;

(17) Require funds to be remitted by means more costly to the mortgagor than a bank or certified check or attorney's check from an attorney's account;

(18) Refuse to communicate with an authorized representative of the mortgagor who provides a written authorization signed by the mortgagor, provided the mortgage servicer may adopt procedures reasonably related to verifying that the representative is in fact authorized to act on behalf of the mortgagor;

(19) Conduct any business covered by sections 36a-715 to 36a-718, inclusive, of the general statutes, as amended by this act, and sections 5 to 16, inclusive, of this act without holding a valid license required under said sections, or assist or aid and abet any person in the conduct of business without a valid license as required under title 36a of the general statutes;

(20) Negligently make any false statement or knowingly and wilfully make any omission of a material fact in connection with any information or reports filed with a governmental agency or the system, as defined in section 36a-485 of the general statutes, or in connection with any investigation conducted by the Banking Commissioner or another governmental agency;

(21) Collect, charge, attempt to collect or charge or use or propose any agreement purporting to collect or charge any fee prohibited by sections 36a-485 to 36a-498f, inclusive, 36a-534a and 36a-534b of the general statutes.

Sec. 14. (NEW) (Effective November 1, 2014) (a) In addition to any authority provided under title 36a of the general statutes, the Banking Commissioner shall have the authority to conduct investigations and examinations as follows:

(1) For purposes of initial licensing, license renewal, license suspension, license conditioning, license revocation or termination, or general or specific inquiry or investigation to determine compliance with sections 36a-715 to 36a-718, inclusive, of the general statutes, as amended by this act, and sections 5 to 16, inclusive, of this act, the commissioner may access, receive and use any books, accounts, records, files, documents, information or evidence including, but not limited to, (A) criminal, civil and administrative history information; (B) personal history and experience information, including independent credit reports obtained from a consumer reporting agency described in Section 603(p) of the Fair Credit Reporting Act, 15 USC 1681a; and (C) any other documents, information or evidence the commissioner deems relevant to the inquiry or investigation regardless of the location, possession, control or custody of such documents, information or evidence.

(2) For the purposes of investigating violations or complaints arising under sections 36a-715 to 36a-718, inclusive, of the general statutes, as amended by this act, and sections 5 to 16, inclusive, of this act or for the purposes of examination, the commissioner may review, investigate or examine any mortgage servicer licensee or person subject to said sections as often as necessary in order to carry out the purposes of said sections. The commissioner may direct, subpoena or order the attendance of and examine under oath all persons whose testimony may be required about the residential mortgage loans or the business or subject matter of any such examination or investigation, and may direct, subpoena or order such person to produce books, accounts, records, files and any other documents the commissioner deems relevant to the inquiry.

(b) Each mortgage servicer licensee or person subject to sections 36a-715 to 36a-718, inclusive, of the general statutes, as amended by this act, and sections 5 to 16, inclusive, of this act shall make or compile reports or prepare other information as directed by the commissioner in order to carry out the purposes of this section including accounting compilations, information lists and data concerning residential mortgage loan transactions in a format prescribed by the commissioner or such other information the commissioner deems necessary to carry out the purposes of sections 36a-715 to 36a-718, inclusive, of the general statutes, as amended by this act, and sections 5 to 16, inclusive, of this act.

(c) In making any examination or investigation authorized by this section, the commissioner may control access to any documents and records of the mortgage servicer licensee or person under examination or investigation. The commissioner may take possession of the documents and records or place a person in exclusive charge of the documents and records in the place where they are usually kept. During the period of control, no person shall remove or attempt to remove any of the documents and records except pursuant to a court order or with the consent of the commissioner. Unless the commissioner has reasonable grounds to believe the documents or records of the mortgage servicer licensee or person have been, or are at risk of being, altered or destroyed for purposes of concealing a violation of sections 36a-715 to 36a-718, inclusive, of the general statutes, as amended by this act, and sections 5 to 16, inclusive, of this act the mortgage servicer licensee or owner of the documents and records shall have access to the documents or records as necessary to conduct its ordinary business affairs.

(d) In order to carry out the purposes of this section, the commissioner may:

(1) Retain attorneys, accountants or other professionals and specialists as examiners, auditors or investigators to conduct or assist in the conduct of examinations or investigations;

(2) Enter into agreements or relationships with other government officials or regulatory associations in order to improve efficiencies and reduce regulatory burden by sharing resources, standardized or uniform methods or procedures, and documents, records, information or evidence obtained under this section;

(3) Use, hire, contract or employ public or privately available analytical systems, methods or software to examine or investigate the mortgage servicer licensee or person subject to sections 36a-715 to 36a-718, inclusive, of the general statutes, as amended by this act, and sections 5 to 16, inclusive, of this act;

(4) Accept and rely on examination or investigation reports made by other government officials, within or without this state; and

(5) Accept audit reports made by an independent certified public accountant for the mortgage servicer licensee or person subject to sections 36a-715 to 36a-718, inclusive, of the general statutes, as amended by this act, and sections 5 to 16, inclusive, of this act in the course of that part of the examination covering the same general subject matter as the audit and may incorporate the audit report in the report of examination, report of investigation or other writing of the commissioner.

(e) The authority of this section shall remain in effect, whether such mortgage servicer licensee or person subject to sections 36a-715 to 36a-718, inclusive, of the general statutes, as amended by this act, and sections 5 to 16, inclusive, of this act, acts or claims to act under any licensing or registration law of this state, or claims to act without such authority.

(f) No mortgage servicer licensee or person subject to investigation or examination under this section may knowingly withhold, abstract, remove, mutilate, destroy or secrete any books, records, computer records or other information.

Sec. 15. (NEW) (Effective November 1, 2014) (a) The Banking Commissioner may suspend, revoke or refuse to renew any mortgage servicer license or take any other action, in accordance with the provisions of section 36a-51 of the general statutes, for any reason which would be sufficient grounds for the commissioner to deny an application for such license under section 5 of this act, or if the commissioner finds that the licensee, any control person of the licensee, the qualified individual or any branch manager with supervisory authority, or any trustee, employee or agent of such licensee has done any of the following: (1) Made any material misstatement in the application; (2) committed any fraud or misrepresentation or misappropriated funds; (3) violated any of the provisions of title 36a of the general statutes or of any regulations adopted pursuant thereto, or any other law or regulation applicable to the conduct of its business; or (4) failed to perform any agreement with a mortgagee or a mortgagor.

(b) Whenever it appears to the commissioner that any person has violated, is violating or is about to violate any provision of section 49-8a or 49-10a of the general statutes, any of the provisions of title 36a of the general statutes or of any regulations adopted pursuant thereto, or any licensee has failed to perform any agreement with a mortgagee or mortgagor, committed any fraud, made any misrepresentation or misappropriated funds, the commissioner may take action against such person or licensee in accordance with sections 36a-50 and 36a-52 of the general statutes.

Sec. 16. (NEW) (Effective November 1, 2014) The Banking Commissioner may adopt such regulations, in accordance with chapter 54 of the general statutes, as the commissioner deems necessary to administer and enforce the provisions of sections 36a-715 to 36a-718, inclusive, of the general statutes, as amended by this act, and sections 5 to 15, inclusive, of this act.

Sec. 17. Section 36a-1 of the 2014 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective November 1, 2014):

This title shall be known as the "Banking Law of Connecticut" and shall be applicable to all Connecticut banks, Connecticut credit unions, mortgage lenders, mortgage correspondent lenders, mortgage brokers, mortgage loan originators, loan processors or underwriters, money transmitters, check cashers, trustees under mortgages or deeds of trust of real property securing certain investments, corporations exercising fiduciary powers, small loan lenders, sales finance companies, mortgage [servicing companies] servicers, debt adjusters, debt negotiators, consumer collection agencies and to such other persons as subject themselves to the provisions of this title or who, by violating any of its provisions, become subject to the penalties provided in this title.

Sec. 18. Subdivision (6) of subsection (c) of section 36a-65 of the general statutes is repealed and the following is substituted in lieu thereof (Effective November 1, 2014):

(6) A licensee under section 36a-489, 36a-541, 36a-556, 36a-581, 36a-600, 36a-628, 36a-656, 36a-671, section 5 of this act or 36a-801 shall pay to the commissioner the actual cost of any examination of the licensee, as such cost is determined by the commissioner. If the licensee fails to pay such cost not later than sixty days after receipt of demand from the commissioner, the commissioner may suspend the license until such costs are paid.

Sec. 19. Subdivision (4) of subsection (a) of section 36a-412 of the general statutes is repealed and the following is substituted in lieu thereof (Effective January 1, 2015):

(4) (A) The laws of this state, including laws regarding (i) community reinvestment pursuant to sections 36a-30 to 36a-33, inclusive; (ii) consumer protection pursuant to sections 36a-41 to 36a-45, inclusive, 36a-290 to 36a-304, inclusive, 36a-306, 36a-307, 36a-315 to 36a-323, inclusive, 36a-645 to 36a-647, inclusive, 36a-690, 36a-695 to 36a-700, inclusive, 36a-705 to 36a-707, inclusive, 36a-715 to 36a-718, inclusive, as amended by this act, sections 5 to 16, inclusive, of this act, 36a-725, 36a-726, 36a-755 to 36a-759, inclusive, 36a-770 to 36a-788, inclusive, and 36a-800 to 36a-810, inclusive; (iii) fair lending pursuant to sections 36a-737, 36a-740 and 36a-741; and (iv) establishment of interstate branches pursuant to section 36a-145 shall apply to any branch in this state of an out-of-state bank, other than a federally-chartered out-of-state bank, to the same extent as such laws apply to a branch in this state of an out-of-state national banking association.

(B) An out-of-state bank, other than a federally-chartered out-of-state bank, that establishes a branch in this state may conduct any activity at such branch that is permissible under the laws of the home state of such out-of-state bank, to the extent such activity is permissible either for a Connecticut bank or for a branch in this state of an out-of-state national banking association. If the commissioner determines that a branch in this state of an out-of-state bank, other than a federally-chartered out-of-state bank, is being operated in violation of any applicable law of this state or in an unsafe and unsound manner, the commissioner may take any enforcement action authorized under this title against such out-of-state bank to the same extent as if such branch were a Connecticut bank, provided the commissioner shall promptly give notice of such action to the home state banking regulator of such out-of-state bank and, to the extent practicable, shall consult and cooperate with such regulator in pursuing and resolving such action. For purposes of this subparagraph, "activity" includes acquiring or retaining any investment.

Sec. 20. Section 49-2a of the general statutes is repealed and the following is substituted in lieu thereof (Effective November 1, 2014):

(a) On and after July 1, 1993, each state bank and trust company, national banking association, state or [federally chartered] federally-chartered savings and loan association, savings bank, insurance company and other mortgagee or mortgage [servicing company] servicer holding funds of a mortgagor in escrow for the payment of taxes and insurance premiums with respect to mortgaged property located in this state shall pay interest on such funds, except as provided in section 49-2c, as amended by this act, at a rate of not less than the average rate paid, as of December 30, 1992, on savings deposits by insured commercial banks as published in the Federal Reserve Board Bulletin and rounded to the nearest one-tenth of one percentage point, except in no event shall the rate be less than one and one-half per cent. On and after January 1, 1994, until September 30, 2012, the rate for each calendar year shall be not less than the deposit index as defined in subsection (c) of this section for that year and rounded to the nearest one-tenth of one percentage point, except in no event shall the rate be less than one and one-half per cent. On and after October 1, 2012, the rate for each calendar year shall be not less than the deposit index as defined in subsection (c) of this section for that year and rounded to the nearest one-tenth of one percentage point. Interest payments shall be credited on the thirty-first day of December annually toward the payment of taxes or insurance premiums as the case may be, on such mortgaged property in the ensuing year. If the mortgage debt is paid prior to December thirty-first in any year, the interest to the date of payment shall be paid to the mortgagor. The provisions of this section shall apply only with respect to mortgages on owner-occupied residential property consisting of not more than four living units and housing cooperatives occupied solely by the shareholders thereof. Any mortgagee or mortgage [servicing company] servicer violating the provisions of this section shall be fined not more than one hundred dollars for each offense.

(b) Each mortgagee or mortgage [servicing company] servicer subject to the provisions of this section may contact the Department of Banking to ascertain the published deposit index to determine the minimum rate paid on funds of a mortgagor held in escrow for the payment of taxes and insurance premiums.

(c) The deposit index for each calendar year shall be equal to the average rate paid on savings deposits by insured commercial banks as last published in the Federal Reserve Board Bulletin in November of the prior year. The commissioner shall determine the deposit index for each calendar year and publish such deposit index in the Department of Banking news bulletin no later than December fifteenth of the prior year. For purposes of this section, "Federal Reserve Board Bulletin" means the monthly survey of selected deposits published as a special supplement to the Federal Reserve Statistical Release Publication H.6 published by the Board of Governors of the Federal Reserve System or, if such bulletin is superseded or becomes unavailable, a substantially similar index or publication.

Sec. 21. Section 49-2c of the general statutes is repealed and the following is substituted in lieu thereof (Effective November 1, 2014):

(a) In no event shall interest be required to be paid on escrow accounts where (1) there is a contract between the mortgagor and the mortgagee, entered into before October 1, 1975, which contains an express disclaimer of an obligation on the part of the mortgagee to pay interest on the accounts, (2) the payment of such interest would violate any federal law or regulation, (3) the accounts are maintained with a mortgage [servicing company] servicer, neither affiliated with nor owned in whole or in part by the mortgagee, under a written contract or any mortgage agreements underlying the contracts, entered into before October 1, 1975, which contract does not permit the mortgage [servicing company] servicer to earn or receive a return from the investment of the accounts, or (4) the accounts are maintained in connection with mortgage loans entered into (A) on and after October 1, 1977, and before January 1, 1989, and which are serviced and held for sale for not more than one year by a mortgage [servicing company] servicer, neither affiliated with nor owned in whole or in part by the purchaser of the mortgage loan, and (B) on and after January 1, 1989, and which are serviced and held for sale for not more than six months by any such mortgage [servicing company] servicer, provided such mortgage [servicing company] servicer shall pay interest on an escrow account maintained in connection with such mortgage loan if the loan is sold within such specified periods and the mortgage [servicing company] servicer continues to service the loan.

(b) In no event shall interest be required to be paid at a rate in excess of two per cent per annum where (1) there is a contract between the mortgagor and the mortgagee entered into before October 1, 1977, which contains an express agreement to pay interest at the rate of two per cent per annum, or (2) such accounts are maintained in connection with mortgage loans entered into prior to October 1, 1977, and which are serviced and held for sale for not more than one year by a mortgage [servicing company] servicer, neither affiliated with nor owned in whole or in part by the purchaser of the mortgage loan.

This act shall take effect as follows and shall amend the following sections:
Section 1	October 1, 2014	36a-715
Sec. 2	October 1, 2014	36a-716
Sec. 3	October 1, 2014	36a-717
Sec. 4	January 1, 2015	36a-718
Sec. 5	November 1, 2014	New section
Sec. 6	November 1, 2014	New section
Sec. 7	November 1, 2014	New section
Sec. 8	November 1, 2014	New section
Sec. 9	November 1, 2014	New section
Sec. 10	January 1, 2015	New section
Sec. 11	January 1, 2015	New section
Sec. 12	January 1, 2015	New section
Sec. 13	January 1, 2015	New section
Sec. 14	November 1, 2014	New section
Sec. 15	November 1, 2014	New section
Sec. 16	November 1, 2014	New section
Sec. 17	November 1, 2014	36a-1
Sec. 18	November 1, 2014	36a-65(c)(6)
Sec. 19	January 1, 2015	36a-412(a)(4)
Sec. 20	November 1, 2014	49-2a
Sec. 21	November 1, 2014	49-2c

Statement of Purpose:

To regulate mortgage servicers in Connecticut and make other conforming changes.

[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.]