Conn. Gen. Stat. § 32-16

Current with legislation from the 2024 Regular and Special Sessions.

Section 32-16 - Insurance of mortgages and loans on economic development projects and information technology projects

(a)

(1) The corporation may (A) upon application of the proposed mortgagee, insure and make advance commitments to insure all or a portion of mortgage payments required by a mortgage on any (i) economic development project, exclusive of machinery, equipment, furniture, fixtures and other personal property, or (ii) any information technology project, and (B) upon application of a borrower, insure and make advance commitments to insure, (i) all or a portion of loan payments required for an information technology project, (ii) a loan for an economic development project used for manufacturing, industrial, research, retail, small business, product development, product warehousing, distribution or other purposes which will create or retain jobs, maintain or diversify industry, including new or emerging technologies, or maintain or increase the tax base, or (iii) a secured or unsecured working capital loan necessary for the start-up or continuation of such a project, upon such terms and conditions as the corporation may prescribe, provided the aggregate amount of contracts of insurance or advance commitments issued under this section, together with contracts of insurance or advance commitments insured under subsection (b) or (d) of this section, outstanding at any one time shall not exceed four times the sum of the amounts available in the Mortgage and Loan Insurance Fund plus the amount of any unpaid grants authorized to be made by the Department of Economic and Community Development to the corporation for deposit in such fund which remain available for purposes of the fund pursuant to the bond authorization in section 32-22, provided the amount of any such contract of insurance or advance commitment shall be measured by the portion of unpaid principal which is insured by the corporation and shall exclude for purposes of such limitation the amount of any contract of insurance or advance commitment to the extent that the liability of the corporation with respect thereto has been reinsured by, or participated in by, an eligible financial institution with a long-term credit rating equal to or higher than that of the state. The aggregate amount of principal obligations of all mortgages and loans so insured shall not constitute indebtedness of the state of Connecticut for purposes of computing the debt limit under section 3-21, provided bonds authorized to be issued pursuant to section 32-22 shall constitute indebtedness of the state of Connecticut for such purposes, whether or not obligations of the state of Connecticut are issued and outstanding in anticipation of the sale of such bonds. Any contract of insurance executed by the corporation under this section shall be conclusive evidence of eligibility for such mortgage or loan insurance, and the validity of any contract of insurance so executed or of an advance commitment to insure shall be incontestable in the hands of an approved mortgagee or lender from the date of the execution of such contract of insurance or advance commitment, except for (I) fraud or misrepresentation on the part of such approved mortgagee or lender, or (II) noncompliance with the terms of the contract of insurance or advance commitment and corporation written procedures in force at the time of issuance of the contract or the advance commitment.

(2) To be eligible for insurance under the provisions of this chapter, a mortgage or agreement for the extension of credit or making of a loan by the corporation or other lender shall:

(A) Be one which is made to and held by the corporation or an eligible financial institution approved by the corporation as responsible and able to service the mortgage or loan properly;

(B) in the case of a mortgage under subparagraph (A) of subdivision (1) of this subsection, involve principal not to exceed twenty-five million dollars for any one economic development project exclusive of machinery, equipment, furniture, fixtures and other personal property, and not to exceed ninety per cent of the cost of such project, except that the corporation may insure a portion of a mortgage or agreement for the extension of credit or making of a loan by the corporation that otherwise satisfies the requirements of this section and the requirements prescribed by the corporation by written procedure if such mortgage or agreement involves principal in excess of twenty-five million dollars, provided any approved contract of insurance shall not exceed twenty-five million dollars and in the case of a loan under subparagraph (B) of subdivision (1) of this subsection, involve principal not to exceed ten million dollars;

(C) have a maturity satisfactory to the corporation but in no case later than twenty-five years from the date of the issuance of the insurance;

(D) contain amortization provisions satisfactory to the corporation requiring payments by the borrower or mortgagor, not in excess of the borrower's or mortgagor's reasonable ability to pay as determined by the corporation;

(E) be in such form and contain such terms and provisions with respect to property insurance, repairs, alterations, payment of taxes and assessments, default reserves, delinquency charges, default remedies, anticipation of maturity, additional and secondary liens and other matters as the corporation may prescribe.

(b) The corporation may, upon application of the proposed mortgagee or borrower, insure and make advance commitments to insure all or a portion of mortgage or loan payments required by a mortgage or loan on new or used machinery, equipment, furniture, fixtures or other personal property, upon such terms and conditions as the corporation may, by written procedure, prescribe, provided (1) such machinery, equipment, furniture, fixtures or other personal property has been acquired for use as or in connection with any economic development project; (2) such machinery, equipment, furniture, fixtures or other personal property shall have been actually installed or located therein within two years after the execution of a commitment to insure mortgage payments signed on behalf of the corporation; and (3) the owner thereof has agreed not to remove such machinery, equipment, furniture, fixtures or other personal property from the state until the principal obligation of the mortgage attributable to the cost of such machinery, equipment, furniture, fixtures or other personal property has been paid in full.

(c) To be eligible for insurance under the provisions of subsection (b) of this section, a mortgage or loan shall:

(1) Be one which is made to and held by an eligible financial institution approved by the corporation;

(2) involve principal not to exceed ten million dollars for any one project and not to exceed eighty per cent of the cost of the mortgaged machinery, equipment, furniture, fixtures or other personal property, provided the corporation may insure a portion of a mortgage or loan that otherwise satisfies the requirements of this section and the requirements prescribed by the corporation by written procedures if it involves principal in excess of ten million dollars and the principal portion of the loan which is insured does not exceed ten million dollars;

(3) have a maturity date satisfactory to the corporation but in no case later than ten years from the date of the mortgage or loan;

(4) contain amortization provisions satisfactory to the corporation requiring payments by the mortgagor or borrower which may include principal and interest payments, cost of local real or personal property taxes and assessments, hazard insurance and such mortgage or loan insurance premium as is required under section 32-18, as the corporation shall from time to time prescribe or approve;

(5) be in such form and contain such terms and provisions, with respect to property insurance, maintenance, alterations, payment of taxes and assessments, restriction of location of the machinery, equipment, furniture, fixtures and other personal property, default reserves, delinquency charges, default remedies, acceleration of maturity, additional and secondary liens and such other matters as the corporation may prescribe.

(d) All payments required to be paid under the terms of any mortgage or other agreement for the extension of credit or making of a loan by the corporation for an economic development project, including machinery, equipment, furniture, fixtures and other personal property, financed by the issuance of bonds or other obligations of the corporation, or of notes issued in anticipation of such bonds or other obligations, shall at all times that such bonds, obligations or notes are outstanding be eligible for insurance pursuant to this chapter. The corporation may insure any eligible mortgage or other agreement by designating such mortgage in the resolution authorizing the bonds, obligations or notes issued to provide funds to finance the economic development project or by endorsing an appropriate certificate on such mortgage or other agreement. In the case of a default in payment with respect to any mortgage or other agreement so insured, the amount of such payment shall immediately, and at all times during the continuance of such default, constitute a charge on the insurance fund and shall be applied by the corporation to the payment of taxes or insurance on the economic development project or of any bonds or notes of the corporation secured by such mortgage or other agreement, regardless of the availability of other revenues or surplus of the corporation for such payments. The corporation shall take or cause to be taken all reasonable steps to enforce the payment of amounts in default on any such mortgage or other agreement and to exercise all available remedies necessary to enforce such mortgage or other agreement and protect the security of the corporation's obligations, and in connection therewith may use any amounts in the Mortgage and Loan Insurance Fund to bid for and purchase in foreclosure or other judicial proceedings any property on which it holds a second or other subordinate mortgage the payments on which are insured under this subsection. The trustee for any bond or other obligation of the corporation or note issued in anticipation thereof or, if there be no such trustee, the holder of any such bond, obligation or note, shall have the right to bring suit to require the application as provided in this section of any amounts in the insurance fund.

(e) In the case of applications for insurance under subdivision (2) of subsection (a) of this section, (1) the corporation shall not issue loan guarantees to insure loans for commercial real estate development projects or for passive real estate ownership, (2) the corporation may issue loan guarantees for projects in which the borrower intends to purchase commercial real estate for use in its principal business operations, (3) no loan guarantee shall be issued pursuant to this section for the financing or refinancing of any project unless the corporation determines that the project is otherwise unable to obtain financing in satisfactory amounts or under reasonable terms or conditions or unless the corporation determines that the borrower is unable to start, continue to operate, expand or maintain operations or relocate to this state without such guarantee, (4) no loan guarantee shall be issued pursuant to this section for the financing or refinancing of any project which the corporation determines may be financed commercially, upon reasonable terms and conditions, without such a guarantee, and which an eligible financial institution nonetheless has attempted to shift into this program, (5) the corporation shall determine whether a project has been inappropriately diverted into this program consistent with the credit availability principles set forth in any applicable guidelines for the loan guarantee program of the Connecticut Works Fund, (6) the corporation may require the participating institution to submit its loan criteria and such other information as may be appropriate and, in reviewing projects that involve the refinancing of existing loans, may require submission of the classification assigned to that loan by examiners for any federal financial regulatory institution, (7) the corporation shall maximize the leveraging capability of loan guarantees to the extent feasible, and (8) no loan guarantee shall be issued to an eligible financial institution for any loan to any executive officer, director or shareholder owning more than five per cent of the outstanding stock of such institution, or any executive officer of any other eligible financial institution or any director or shareholder owning more than five per cent of the outstanding stock of any such institution, or a member of the immediate family of such an executive officer, director or shareholder or to any company or entity controlled by any such persons.

Conn. Gen. Stat. § 32-16

(1961, P.A. 542, S. 7; 1963, P.A. 601, S. 5; February, 1965, P.A. 494, S. 8; 1967, P.A. 552, S. 1; 1971, P.A. 503, S. 2; 1972, P.A. 195, S. 20; P.A. 73-599, S. 28; P.A. 75-461, S. 3, 6; P.A. 77-370, S. 7, 13; P.A. 78-357, S. 14, 16; P.A. 80-267, S. 9; P.A. 81-384, S. 2, 13; 81-388, S. 10, 12; P.A. 86-212, S. 1, 3; P.A. 87-536, S. 3, 7; P.A. 88-265, S. 4, 36; P.A. 91-161, S. 1, 9; P.A. 93-360, S. 3, 19; P.A. 95-250, S. 1; P.A. 96-211, S. 1, 5, 6; P.A. 00-178, S. 1; June Sp. Sess. P.A. 00-1, S. 43, 46; P.A. 01-96, S. 2; 01-195, S. 177, 181; June 12 Sp. Sess. P.A. 12-1, S. 152.)

Cited. 150 C. 344.

See Sec. 32-23s re interpretation of amendments to this section effective on June 29, 1981.