senate Bill S5396

Signed by Governor

Relates to powers of the agency; allows agency to exercise powers when its obligations are purchased by certain financial institutions

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed by Governor
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actions

  • 17 / May / 2011
    • REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT
  • 24 / May / 2011
    • 1ST REPORT CAL.824
  • 25 / May / 2011
    • 2ND REPORT CAL.
  • 01 / Jun / 2011
    • ADVANCED TO THIRD READING
  • 16 / Jun / 2011
    • PASSED SENATE
  • 16 / Jun / 2011
    • DELIVERED TO ASSEMBLY
  • 16 / Jun / 2011
    • REFERRED TO HOUSING
  • 23 / Jun / 2011
    • SUBSTITUTED FOR A7641
  • 23 / Jun / 2011
    • ORDERED TO THIRD READING RULES CAL.613
  • 23 / Jun / 2011
    • PASSED ASSEMBLY
  • 23 / Jun / 2011
    • RETURNED TO SENATE
  • 12 / Sep / 2011
    • DELIVERED TO GOVERNOR
  • 23 / Sep / 2011
    • SIGNED CHAP.575

Summary

Relates to powers of the agency; allows agency to exercise powers when its obligations are purchased by certain financial institutions.

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Bill Details

See Assembly Version of this Bill:
A7641
Versions:
S5396
Legislative Cycle:
2011-2012
Law Section:
Private Housing Finance Law
Laws Affected:
Amd ยงยง44 & 654, Priv Hous Fin L

Sponsor Memo

BILL NUMBER:S5396

TITLE OF BILL:
An act
to amend the private housing finance law, in relation to powers of the
agency

PURPOSE OR GENERAL IDEA OF BILL:
To provide statutory authority for HDC and HFA to issue unrated
bonds for private placement beyond the provision of financing to
entities separately regulated under the Private Housing Finance Law.

SUMMARY OF SPECIFIC PROVISIONS:

Sections 1 & 2: Expands the statutory authority beyond the provisions
of financing to entities already regulated by current law.

Section 3: Effective Date

JUSTIFICATION:
Changes in the 421(a) real estate tax abatement program in New York
City have made the tax-exempt bond program the only viable way to
finance much needed mixed-income and affordable rental housing. Not
only is the use of this below-market financing critical to creating
much needed housing in New York City, but these large new
construction projects create numerous construction and permanent jobs.

Currently, in order to use tax-exempt bond financing, long term credit
enhancement and variable rate bond liquidity must be provided. To
date, Fannie Mae and Freddie Mac have been the primary providers of
this credit enhancement and liquidity.

This type of credit enhancement enables the underlying bonds to obtain
greater than an investment grade rating which is the minimum rating
currently required under the applicable provisions of the mixed
income and affordable program powers of the New York State Housing
Finance Agency ("HFA") and the New York City Housing Development
Corporation ("HDC"). In light of the current uncertainty regarding
the future operations of both Fannie Mae and Freddie Mac, it may be
necessary to utilize alternative structures to obtain credit
enhancement for the bonds issued to finance this much needed rental
housing. One current financing structure that is used by other
issuers in New York State and other states permits the issuance of
unrated bonds which are purchased by a financial institution.

Under this structure, the real estate credit risk is assumed by the
financial institution as is the case with a Fannie Mae or Freddie Mac
credit enhancement. Consequently, the financial institution is
incentivized to carefully underwrite the viability of the project to
ensure that its investment remains stable. By amending
the powers of HFA and HDC as set forth in this bill, both HFA and
HDC would have the flexibility to issue bonds in accordance with this
structure which would enable the developers of these type of
projects to have an additional financing alternative without imposing
credit risks on HFA and HDC.


More importantly, should Fannie Mae or Freddie Mac no longer provide
bond credit enhancements, this structure may provide the only viable
financing option.

Loans financed with proceeds of unrated HFA and HDC bonds issued for
private placement offer cost efficiencies to their borrowers. Without
the involvement of rating agencies, outside underwriters, credit
enhancers and their respective legal counsels, private placement
transactions can be completed at a substantially lower cost to the
borrower. These savings are particularly important to smaller 100%
affordable projects, for which the cost of issuance of a public
offering are often prohibitively expensive.
Additionally, by continuing to find vehicles to encourage the
development of housing, this method of financing will stimulate job
creation throughout the State.

Private placement of bonds to finance affordable housing is a proven
method of financing for certain local banks in New York. However,
HFA and HDC do not currently have statutory authority to issue unrated
bonds for private placement beyond the provision of financing to
entities separately regulated under the Private Housing Finance Law.

PRIOR LEGISLATIVE HISTORY:
New Bill.

EFFECTIVE DATE:
This act shall take effect immediately, with provisions.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  5396

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                              May 17, 2011
                               ___________

Introduced by Sens. LIBOUS, YOUNG -- read twice and ordered printed, and
  when printed to be committed to the Committee on Housing, Construction
  and Community Development

AN  ACT  to amend the private housing finance law, in relation to powers
  of the agency

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  Paragraph  3  of  subdivision  29-a  of section 44 of the
private housing finance law, as amended by chapter 474 of  the  laws  of
1987, is amended to read as follows:
  (3)  The  powers  granted by this subdivision may be exercised only if
(a) obligations of the agency have been issued to fund the loan made  or
purchased by the agency and such obligations have received an investment
grade  rating from a recognized rating agency [or]; (b) the loan made or
purchased by the agency is fully secured as to principal and interest by
insurance or a commitment to insure issued by  the  state  of  New  York
mortgage agency or by the general credit of a bank, national bank, trust
company,  savings bank, savings and loan association, insurance company,
governmental agency of the United States, or any combination thereof; OR
(C) OBLIGATIONS OF THE AGENCY ARE PURCHASED BY A  BANK,  NATIONAL  BANK,
TRUST  COMPANY,  SAVINGS  BANK,  SAVINGS AND LOAN ASSOCIATION, INSURANCE
COMPANY, GOVERNMENTAL AGENCY OF THE UNITED STATES, OR  ANY  WHOLLY-OWNED
SUBSIDIARY OR COMBINATION THEREOF.
  S  2.  Paragraph  3  of subdivision 23-c of section 654 of the private
housing finance law, as added by chapter 702 of the  laws  of  1992,  is
amended to read as follows:
  (3)  The  powers  granted by this subdivision may be exercised only if
(a) obligations of the corporation have been issued  to  fund  the  loan
made  or purchased by the corporation and such obligations have received
an investment grade rating from a recognized rating agency [or]; (b) the
loan made or purchased by the corporation is fully secured as to princi-

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD11485-01-1

S. 5396                             2

pal and interest by insurance or a commitment to insure by the state  of
New York mortgage agency or New York city residential mortgage insurance
corporation  or  by  the  general credit of a bank, national bank, trust
company,  savings bank, savings and loan association, insurance company,
governmental agency of the United States, or any combination thereof; OR
(C) OBLIGATIONS OF THE CORPORATION ARE PURCHASED  BY  A  BANK,  NATIONAL
BANK,  TRUST COMPANY, SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, INSUR-
ANCE  COMPANY,  GOVERNMENTAL  AGENCY  OF  THE  UNITED  STATES,  OR   ANY
WHOLLY-OWNED SUBSIDIARY OR COMBINATION THEREOF.
  S  3.  This  act shall take effect immediately; provided, however that
the amendments to subdivision 29-a of section 44 of the private  housing
finance  law made by section one of this act shall not affect the repeal
of  such  subdivision  and  shall  be  deemed  repealed  therewith;  and
provided,  further,  that  the amendments to subdivision 23-c of section
654 of the private housing finance law made by section two of  this  act
shall  not  affect  the  repeal  of such subdivision and shall be deemed
repealed therewith.

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