(a) As used in this section, the term “mortgage loan” means a loan, line of credit or letter of credit secured wholly or substantially by a lien on or interest in real estate, including a leasehold interest, for which the lien or interest is central to the extension of credit, but does not include the following loan transactions:

(1) Loans that are to be sold by the Connecticut bank promptly after origination by such bank, without extended recourse for payment default, to a financially responsible third party, provided such loans shall be considered mortgage loans for purposes of purchases and participations by a Connecticut bank if such loans otherwise qualify as mortgage loans under this subsection.

(2) Loans for which a lien on or interest in real estate is taken as additional collateral through an abundance of caution by the Connecticut bank, including loans pursuant to which the bank takes a blanket lien on all or substantially all of the assets of the borrower, and the value of the real estate is low relative to the aggregate value of all collateral.

(3) Loans made to manufacturing, industrial or commercial borrowers with a lien or interest in real estate taken as all or a portion of the collateral to directly or indirectly secure such loans, when the bank looks for repayment out of the operations of the borrower’s business, relying on the borrower’s general credit standing and the borrower’s forecast of operations.

(b) (1) The assets of Connecticut banks may be invested in mortgage loans, subject to the general limitations set forth in this section.

(2) Any such mortgage loan shall be secured either by (A) a first mortgage which is a first lien or (B) a mortgage which is subordinate to another mortgage or other mortgages, provided, in the case of a loan secured by a mortgage which is subordinate to another mortgage or other mortgages, which other mortgage or mortgages are held by a person other than the Connecticut bank, the real estate securing such loan is (i) residential real estate, or (ii) nonresidential real estate provided the loan does not exceed, at the time of origination, a loan-to-value ratio of fifty per cent, or (iii) nonresidential real estate in a loan transaction which, at the time of origination, exceeds a loan-to-value ratio of fifty per cent, provided the aggregate amount of all such loans made pursuant to this subparagraph (B)(iii) does not exceed, at the time of origination, twenty-five per cent of the equity capital and reserves for loan and lease losses of the Connecticut bank. A loan which was included within the aggregate limit of subparagraph (B)(iii) of this subdivision subsequently may be excluded if the loan is repaid or if the applicable loan-to-value ratio is reduced to fifty per cent or below because of a reduction in principal or senior liens, additional contributions of real estate collateral, or an increase in equity value substantiated by a current suitable appraisal or evaluation.

(c) “Real estate”, as used in this section, includes refrigerating equipment, dishwashing equipment, stoves and clothes washing machines, hereinafter called “household equipment”, used on the premises at the time of execution of the mortgage or substituted after the mortgage is executed if such equipment is specifically declared in the mortgage deed to be used as a part of the mortgaged realty, and if such mortgage declares that household equipment substituted for the original household equipment mentioned in such mortgage shall be part of the mortgaged realty.

(d) The real estate shall be unencumbered, except to the extent that prior mortgages are permitted by subdivision (2) of subsection (b) of this section. A satisfactory certificate of title or other suitable form of title review issued by a suitable person approved by such Connecticut bank, or a satisfactory policy of title insurance, shall be filed with the lending bank until the loan is paid or until the loan is sold. The following are not encumbrances within the meaning of this section: (1) Reservations to the United States of America of fissionable materials, (2) leases, provided the impact of the lease is adequately reflected in the appraisal or evaluation required by subsection (e) of this section, and (3) easements, restrictions, interests and other rights (A) which do not materially adversely affect the marketability of the real estate, (B) which are otherwise adequately reflected in the appraisal or evaluation required by subsection (e) of this section, (C) where the attendant risks are satisfactorily insured under an acceptable policy of title insurance, or (D) which the bank otherwise reasonably determines do not present a material adverse risk after consideration of the relevant underwriting risks for the loan or class of loans. Connecticut banks shall adopt and implement a real estate lending policy which reflects, in accordance with safe and sound banking principles, consideration of acceptable standards for title review and title insurance.

(e) The real estate shall be appraised or otherwise suitably evaluated, before any loan is made on its security, by one or more suitable persons who are familiar with real estate values in the community where the real estate is located. Such persons shall be approved by the governing board of the Connecticut bank making the loan, or by a management committee, board committee or agent appropriately designated by such governing board in accordance with the appraisal policy required by this subsection, provided, if the loan under consideration is a loan to be insured or guaranteed by a governmental agency, the appraiser may be one who appraised the property for the governmental agency. Such appraisal or evaluation shall be in writing, shall state the amount at which the property has been appraised or evaluated and shall be filed with the Connecticut bank until the loan is paid or until the loan is sold. Connecticut banks shall adopt and implement an appraisal policy which reflects, in accordance with safe and sound banking principles, consideration of appraiser qualifications, procedures for the approval and selection of appraisers, appraisal and evaluation standards, and the bank’s administration of the appraisal and evaluation process.

(f) Notwithstanding the provisions of subdivision (2) of subsection (h) of this section, the Connecticut bank, in its discretion and for such a period as it deems advisable, may excuse the borrower on a mortgage loan from amortization of the principal of such loan, provided the governing board of the Connecticut bank, or a management committee or board committee appropriately designated by such governing board, has reviewed the particular mortgage loan and has determined such action to be prudent under the circumstances.

(g) Loans not exceeding fifty per cent of the value of the real estate may be made without further restriction than is set forth in subsections (a) to (f), inclusive, of this section. The requirements of this section relating to the relationship between the loan amount and the value of the real estate shall be calculated on the basis of the aggregate amount of such loan plus the unpaid amount of any obligation secured by any prior mortgages or liens and the amount of any advancements permissible under any loan secured by such prior mortgage or mortgages in relation to the value of the real estate interest.

(h) Loans not exceeding ninety per cent of the value of the real estate may be made subject to the following additional limitations set forth in subdivisions (1) and (2) of this subsection. (1) No loan shall be made until the person or persons liable on the note have filed with the bank a satisfactory financial statement which shall be kept on file. (2) All such loans shall require repayment of principal and payment of interest in at least consecutive semiannual installments of principal and interest, such payments to be sufficient to pay the loan in full not later than forty-two years from the date of the first payment and the first payment to be made within twenty-four months of the date of the note. The requirements for semiannual principal payments pursuant to this subdivision are not applicable to: (A) Consumer revolving loan agreements made pursuant to subsection (c) of § 49-2, (B) alternative mortgage loans made pursuant to § 36a-265, (C) loans which may be demanded at any time and which are secured by residential real estate and (D) any other loan or class of loans determined by the commissioner not to be subject to such requirements.

(i) The following mortgage loans may be made without regard to the ninety per cent loan-to-value limit set forth in subsection (h) of this section:

(1) Loans guaranteed or insured by the United States government or its agencies, provided the amount of the guaranty or insurance is at least equal to the portion of the loan that exceeds the applicable loan-to-value limit.

(2) Loans backed by the full faith and credit of a state government, provided the amount of the assurance is at least equal to the portion of the loan that exceeds the applicable loan-to-value limit.

(3) Loans guaranteed or insured by a state, municipal or local government, or its agency, provided (A) the amount of the guaranty or insurance is at least equal to the portion of the loan that exceeds the applicable loan-to-value limit and (B) the bank has determined that the guarantor or insurer has the financial capacity and willingness to perform under the terms of the guaranty or insurance agreement.

(4) Loans that are renewed, refinanced, or restructured without the advancement of new funds or an increase in a line of credit, except for reasonable closing costs.

(5) Loans that are renewed, refinanced, or restructured in connection with a workout situation, either with or without the advancement of new funds, where such action is consistent with safe and sound banking practices and is a part of a clearly defined and well documented program to achieve orderly liquidation of the debt, reduce risk of loss or maximize recovery of the loan.

(6) Loans that facilitate the sale of real estate acquired by the Connecticut bank in the ordinary course of collecting a debt previously contracted in good faith.

(7) Loans where the Connecticut bank does not rely principally on the real estate as security.

(8) Loans where all or part of such loan is made in primary reliance upon the mortgage insurance policy of a private mortgage guaranty company, licensed by the Insurance Commissioner to do business in this state and approved by the commissioner.

(9) Loans or loan programs which are determined by the governing board of the Connecticut bank, or by a management committee or board committee appropriately designated by such governing board, to be prudent under the circumstances after consideration of the relevant underwriting risks, provided (A) the aggregate amount of all such loans, calculated at the time of origination of each such loan, does not exceed one hundred per cent of the bank’s equity capital and reserves for loan and lease losses, (B) the aggregate amount of all such loans, calculated at the time of origination of each such loan, other than loans secured by one-to-four-family residential property, does not exceed thirty per cent of the bank’s equity capital and reserves for loan and lease losses, (C) the aggregate amount of all such loans is included in the percentage of assets limitation specified in subsection (s) of this section, and (D) the bank makes a notation of such determination and the reasons therefor in the applicable loan file. A loan which is included within the aggregate limits of this subsection may subsequently be excluded if the applicable loan-to-value limit is satisfied because of a reduction in principal or senior liens, additional contribution of real estate collateral or increases in equity value substantiated by a current suitable appraisal or evaluation.

(j) Loans made under this section may be for the purpose of building upon or improving the property of the borrower, and may be made in installments advanced at the discretion of the lending institution as the work progresses; provided at no time shall the ratio of the amount loaned to the then total value exceed the ratio the final loan is to bear to the value of the completed property. Loans made to finance the construction of buildings and having a maturity of not more than twenty-four months or having a maturity of not more than thirty-six months if approved by the commissioner are not subject to the limitations imposed by this subsection.

(k) Connecticut banks are authorized to make and invest in any mortgage loan, including construction and improvement loans, insured by the Federal Housing Administrator without regard to the limitations and restrictions of this section, except that such loans are subject to the following limitations: (1) In the case of loans secured by a first mortgage on real estate, the contract of insurance shall contain a provision that the debentures to be issued by the Federal Housing Administrator in settlement of such insurance, in the event of the foreclosure or default of any such loan or mortgage, shall be fully guaranteed as to payment of principal and interest by the government of the United States, (2) if the bank has a commitment for such insurance, issued by the Federal Housing Administration, it may grant a loan to a borrower for the purpose of building upon or improving the property of the borrower, the money so borrowed to be advanced at the discretion of the bank in installments as the work progresses, provided the total of all advances made does not exceed eighty per cent of the value of the property on the date of each advance or the proportion that the final loan is to bear to the final estimated value of the property, whichever is greater, except that the final advance may be in such an amount that the total of all advances made may equal but not exceed the amount of such commitment. The final advance shall not be made until the buildings or improvements have been inspected and approved by the Federal Housing Administration for an insured loan.

(l) Subject to such regulations and restrictions as the commissioner finds necessary and proper, and subject to the limitations, restrictions and privileges contained in this subsection, Connecticut banks are authorized to make and invest in any loan which the Administrator of Veterans Affairs guarantees, makes a commitment to guarantee, or insures pursuant to Title III of an Act of Congress entitled “Servicemen’s Readjustment Act of 1944”, as amended, without regard to the limitations and restrictions of this title. (1) Each such loan shall be subject to the provisions of this title prescribing the maximum limits, in amount, of: (A) A loan or loans to or total liability of any one individual, and (B) a loan upon the security of real estate, with relation to the appraised value of such real estate. (2) Each such loan shall be secured by a mortgage on real estate, except that a loan pursuant to Section 501, 502 or 503 of the Servicemen’s Readjustment Act of 1944, as amended, for the purpose of repairing, altering or improving a building or buildings, and a loan pursuant to Section 505(a) of said act, need not be secured by a lien on real property.

(m) (1) Additional sums, as evidenced by a note or notes signed by the then owner of record of the mortgaged premises, may be advanced by a Connecticut bank to such owner and shall be a part of the mortgage debt due the mortgagee, provided (A) such advancements shall not exceed the difference between the indebtedness at the time of the advance and the original mortgage debt, (B) the original mortgage deed shall have been recorded after October 1, 1951, and shall contain specific provisions granting this right, and (C) the terms of repayment of such advancements shall not extend the time of repayment beyond the maturity of the original mortgage debt. If the then owner of record is other than the original mortgagor, neither the original mortgagor nor any other former owner of the mortgaged premises is liable on such advancements.

(2) Advancements may also be made by writing open-end mortgages in accordance with the provisions of § 49-2.

(n) (1) Connecticut banks may participate with other lenders, which may be corporations, business trusts, pension trusts, governments or government agencies, in mortgage loans which Connecticut banks are permitted to invest in under this section, but the amount of the participating interest of any Connecticut bank in any one such loan shall not exceed the amount which such bank would be permitted to invest individually in any one loan of the same class under this section, and the amount of the participating interests shall be included in determining whether or not such bank is exceeding its loan limits.

(2) Connecticut banks may participate in mortgage loans only pursuant to a written agreement between all the participating lenders and the servicing agent for such loan and the servicing agent may impose a service charge therefor.

(o) Any Connecticut bank may grant a loan secured by a first mortgage on property of the borrower without regard to the limitations and restrictions on loans imposed by this section, if the borrower has an agreement with a housing authority created under § 8-40, secured by a commitment of the United States Department of Housing and Urban Development, pursuant to which the borrower is to construct housing upon the property and the housing authority is to purchase the property upon completion of construction, the money so borrowed to be advanced at the discretion of the bank as construction progresses, provided the ratio of the total of all advances made to the amount of the agreed purchase price at no time exceeds ninety per cent of the ratio of the value of the property to the expected value of the property upon completion of construction.

(p) If a loan made under this section is secured by a mortgage on income-producing real estate and if the Connecticut bank relies upon such real estate or income production as primary security for the loan, the bank need not require that any person be personally liable on the note, in which case the bank shall retain in its files, in lieu of the financial statements required by subdivision (1) of subsection (h) of this section, such income projection statements, tenants’ financial statements and other credit information as the bank deems necessary.

(q) Subject to such regulations as the commissioner may adopt, Connecticut banks may make mortgage loans secured by leasehold interests, provided the leasehold estate securing such mortgage loan has a remaining term at the time such mortgage loan is originated by the bank which does not expire prior to the maturity of the mortgage loan obligation. The term of the leasehold estate shall not include any period for which the lease may grant an option of renewal.

(r) Any Connecticut bank may, in connection with any mortgage loan made by it, contract with the mortgagor for interest to be paid currently or to accrue, and, if such interest is to accrue, for the interest to be added to the mortgage debt on which interest may be charged and collected. Accrued interest which is added to the mortgage debt shall be secured by the mortgage to the same extent as the principal of the mortgage debt.

(s) The assets of a Connecticut bank may be invested in mortgage loans which do not conform to the requirements of this section, provided the governing board of the Connecticut bank, or a management committee or board committee appropriately designated by such governing board, has reviewed the nonconforming aspects of the particular mortgage loan or mortgage loan program and has determined such mortgage loan or mortgage loan program to be prudent under the circumstances and all such mortgage loans outstanding at the time of origination when combined with the loans made pursuant to subdivision (9) of subsection (i) of this section, do not exceed eight per cent of the assets of the bank. The bank shall make a notation of the prudence determination and the reasons for such determination in the applicable loan file. A loan which was included within the percentage of assets limitation of this subsection subsequently may be excluded if the loan is repaid or if the nonconforming aspects are eliminated or otherwise cease to exist.