PA 09-161—HB 6233
AN ACT CONCERNING SAFE HARBOR PROVISIONS FOR REVOLVING LOANS
SUMMARY: This act extends the protections for commercial revolving loans to “commercial future advance loans. ” Under the open-end mortgage law, a “commercial revolving loan” involves advances of all or part of the loan proceeds and repayments of all or part of the outstanding balance of the loan from time to time. As long as the mortgage and underlying note comply with certain statutory requirements, the mortgage and the advances made under it have priority over other claims recorded after the mortgage was recorded (including advances made after the other claims).
The law also permits a person who guarantees an open-end loan, including a commercial revolving loan, for someone else to secure that guarantee with a mortgage on his or her real estate under the same conditions as apply to the borrower if certain statutory conditions are met.
The act extends them to all “commercial future advance loans,” which specifically include (1) a commercial revolving loan wherein all or part of the loan proceeds that have been repaid may be readvanced and (2) a commercial nonrevolving loan wherein previously advanced loan proceeds, once repaid, cannot be readvanced.
EFFECTIVE DATE: October 1, 2009
OLR Tracking: SC: JR: JL: TS