🔒Bill requiring lenders to accept biweekly mortgage payments draws banking industry opposition

Connecticut lawmakers are considering legislation that would require mortgage lenders to accept more flexible payment schedules from borrowers, a proposal the state’s banking industry says could increase costs and disrupt established loan servicing systems. The legislature’s Banking Committee on Tuesday approved Senate Bill 217, which would require mortgage lenders and servicers to accept mortgage payments made on a monthly, semimonthly or biweekly basis for loans originated on or after Oct. 1, 2026. Supporters say the measure could give homeowners more flexibility in managing their finances and potentially allow them to pay down mortgage balances faster. But the Connecticut Bankers Association is opposing the proposal, arguing the mandate would create significant operational and compliance challenges for lenders. In testimony submitted to the Banking Committee, CBA President and CEO Tom Mongellow said mortgage servicing systems used by community banks are largely designed around monthly payment cycles and are typically provided by third-party vendors that serve the national mortgage market. Requiring lenders to accept semimonthly or biweekly payments would require extensive technology modifications, coordination with vendors, changes to disclosures and additional staff training, the association said. “Mandating acceptance of alternative payment frequencies would require substantial modifications to existing mortgage servicing systems,” the group wrote in its testimony. Bankers also warn the change could conflict with requirements in the secondary mortgage market, where most home loans are ultimately sold to investors or government-backed entities such as Fannie Mae, Freddie Mac and the Federal Housing Administration. According to the association, about 70% of Connecticut mortgages are tied to that secondary market, where servicing practices are standardized and often structured around monthly payment schedules. If Connecticut required lenders to accept alternative payment frequencies, the state could become an outlier, potentially discouraging investors from purchasing Connecticut mortgages, the association said. That, in turn, could increase the cost of mortgage lending and reduce loan availability, particularly for smaller community banks. “To offset these implementation and operational expenses, lenders and servicers will ultimately need to increase pricing structures,” the association said in its testimony. SB 217 was approved by the Banking Committee in a 13-0 vote. It has been filed with the Legislative Commissioners' Office, while it awaits further action. Lawmakers have introduced a number of proposals this session aimed at addressing housing affordability and expanding homeownership opportunities.