The proposed legislation, General Assembly Raised Bill No. 5317, aims to define "mortgage loan" specifically for the purpose of certain notice provisions related to flood damage and insurance. The bill introduces new legal language that defines a "mortgage loan" as a loan secured by a first mortgage on one-to-four-family residential real property located in the state, made for the purpose of financing the purchase of such property. This definition replaces the previous language in Section 49-7b, which is being repealed.

Additionally, the bill mandates that creditors must provide written notice to mortgage loan applicants at least ten days prior to closing. This notice must inform applicants that standard homeowners insurance does not cover flood damage, that flood damage can occur regardless of the property's location in a flood zone, and that consulting a licensed insurance producer or surplus lines broker about flood insurance is advisable. The notice must be written in plain language and signed by the applicant to acknowledge receipt, with creditors required to maintain a copy of this notice in the mortgage records. The act is set to take effect on July 1, 2026.