Restrictions on provisions in nonprime home loans

(a) A lender shall not offer a nonprime home loan that contains: (1) A prepayment penalty, except that this prohibition shall not apply to FHA loans; (2) A provision requiring a borrower, whether acting individually or on behalf of others similarly situated, to assert any claim or defense in a nonjudicial forum that: (A) Utilizes principles which are inconsistent with the law as set forth in the general statutes or common law; (B) limits any claim or defense the borrower may have; or (C) is less convenient, more costly or more dilatory for the resolution of a dispute than a judicial forum established in this state where the borrower may otherwise properly bring a claim or defense; (3) For a loan with a term of less than seven years, a payment schedule with regular periodic payments that when aggregated do not fully amortize the outstanding principal balance, except that this limitation does not apply to a loan with maturities of less than one year if the purpose of the loan is a bridge loan, as used in 12 CFR 1026.32, as amended from time to time, connected with the acquisition or construction of a dwelling intended to become the borrower's principal dwelling; (4) A payment schedule with regular periodic payments that cause the principal balance to increase; (5) A payment schedule that consolidates more than two periodic payments and pays them in advance from the proceeds, unless such payments are required to be escrowed by a governmental agency; (6) Default charges in excess of five per cent of the amount in default; or (7) A call provision that permits the lender, in its sole discretion, to accelerate the indebtedness. This prohibition shall not apply when repayment of the loan is accelerated by bona fide default, pursuant to a due-on-sale clause provision or pursuant to another provision of the loan agreement unrelated to the payment schedule, including, but not limited to, bankruptcy or receivership. (b) If a nonprime home loan contains a provision that violates subsection (a) of this section, that provision shall be void and unenforceable, provided the lender received the application for such nonprime home loan on or after October 1, 2009.