The proposed legislation, General Assembly Raised Bill No. 5209, aims to establish specific requirements for shared appreciation agreements, which are financial arrangements between mortgage lenders and borrowers. The bill introduces new legal language that clarifies the definitions of "mortgage lender" and "shared appreciation agreement" as per section 36a-485, and it outlines the conditions under which these agreements operate. Notably, it mandates that interest on shared appreciation agreements must be simple interest based on the lump sum payment at loan maturity. Additionally, it specifies that these agreements cannot impose certain restrictions on borrowers, such as requiring property occupancy or preventing refinancing, and prohibits various fees and penalties that could burden the borrower.

Furthermore, the bill outlines essential provisions that must be included in shared appreciation agreements, such as the requirement for lenders to provide advance notice of actions affecting the borrower’s rights, itemized payoff quotes, and a clear process for terminating the agreement. It also emphasizes the importance of appraisals conducted by independent, certified appraisers and includes protections for borrowers, such as the right to cancel the agreement within three business days and the lender's obligation to cover legal costs if the borrower successfully disputes any terms. The act is set to take effect on October 1, 2026, and aims to enhance borrower protections and transparency in shared appreciation agreements.