Senator Kane Applauds Connecticut’s New Responsible Lending Law

October 17, 2008

Senator Rob Kane (R-32), a ranking member of the General Assembly’s Banks Committee, said Connecticut homebuyers will benefit from provisions of a comprehensive new state law that clearly describes the responsibilities of mortgage brokers.

“Among other things, this new law regulates mortgage brokers the way banks are already regulated. For the first time, we clearly spell out what we expect of mortgage brokers. Our intent is to provide Connecticut with a safer, better regulated lending environment that, hopefully, will protect us against a future reoccurrence of the current mortgage crisis,” said Senator Kane.

The new law (PA 08-176, AAC Responsible Lending and Economic Security) describes several responsibilities imposed on mortgage brokers, in addition to others required under federal, state or common law. Those responsibilities include requirements that mortgage brokers:

• Use reasonable care, skill and diligence, and act in good faith in dealing with borrowers.
• Make reasonable good faith efforts to secure mortgages that are in borrowers’ reasonable best interests considering all the circumstances reasonably available to brokers, including rates, points, fees, charges, costs and product types.
• Ensure that the cost of credit is reasonably appropriate considering borrowers’ level of credit worthiness and other underwriting concerns.
• Notify other lenders of payment obligations before closing, if more than one mortgage is to be made by different lenders.

Senator Kane said that spelling out our expectations of mortgage brokers is just one aspect of this far-reaching, comprehensive new law. Among other things, it also creates one new program and expands an existing program to help homeowners avoid foreclosure, and authorizes the state to buy mortgages and place eligible borrowers on an affordable repayment plan. As the Senate’s ranking member of the legislature’s Banks Committee, Senator Kane serves on the Commission on Nontraditional Loans and Home Equity Lines of Credit created by this law to look at how the mortgage crisis is affecting us and recommend ways the state can help.

“It is our hope that this new law will not only help Connecticut alleviate the current mortgage crisis, but also help us address the issues that contributed to this situation,” said Senator Kane.