senate Bill S1245

Relates to the credit for servicing certain mortgages

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Bill Status


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

  • 09 / Jan / 2013
    • REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS
  • 08 / Jan / 2014
    • REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS

Summary

Relates to the credit for servicing certain mortgages.

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Bill Details

Versions:
S1245
Legislative Cycle:
2013-2014
Current Committee:
Senate Investigations And Government Operations
Law Section:
Tax Law
Laws Affected:
Amd ยง1456, Tax L
Versions Introduced in Previous Legislative Cycles:
2011-2012: S1774
2009-2010: S5997

Sponsor Memo

BILL NUMBER:S1245

TITLE OF BILL:
An act
to amend the tax law, in relation to the credit for serving certain
mortgages

PURPOSE:
This bill would amend Section 1456(a) of the
Tax Law to allow
a bank who acquires mortgages in connection with any State of New
York Mortgage Agency program for the sale of the mortgage to the
Federal National Mortgage Association or transfer of the mortgage for
a security issued by the Federal National Mortgage Association to
have credited to the bank certain amounts annually to apply upon or
in lieu of the payment of any tax to which it may be subject under
Section 1456(a) of the Tax Law.

SUMMARY OF PROVISIONS:
Section 1 of the bill amends Section 1456(a) of
the Tax Law to provide that the tax credit available to banks that
service mortgages of the State of New York Mortgage Agency shall be
available in cases where the mortgages are acquired by the servicing
bank for the sale of the mortgage to the Federal National Mortgage
Association or transfer of the mortgage for a security issued by the
Federal National Mortgage Association.

Section 2 of the bill provides for an immediate effective date.

EXISTING LAW:
Section 1456(a) of the Tax Law provides that banks which
shall have entered into a contract with the state of New York
mortgage agency to service mortgages acquired by such agency pursuant
to the state of New York mortgage agency act, shall be eligible to
receive a tax credit.

LEGISLATIVE HISTORY:
2011-12: S.1774 Referred to Investigations & Government Operations
2009-10: S.5997 Referred to Investigations & Government Operations

JUSTIFICATION:
The ability of SONYMA, and other issuers of mortgage
revenue bonds, to borrow in the tax-exempt markets to fund mortgage
programs has been negatively impacted as a result of a loss of
investor confidence as well as interest rate volatility associated
with the market events of 2008. SONYMA's borrowing costs for its
single family programs have increased as a result of the turbulent
markets that have been with us since mid-2008, thus making it a less
competitive provider of mortgage loan products to first time
homebuyers. This is happening at a time when that customer base, low
to moderate income first time homebuyers, is more than ever in need
of safe, fixed rate mortgage loans with down payment or closing cost
assistance.
For the first time in its history, the Agency in the fall of 2008 was
not able to access the capital markets. Since then, as the markets
have slowly recovered, its ability to issue long-term fixed rate debt


has
become more costly, as housing bond investors demand higher yields in
return for what they perceive (wrongly in the case of SONYMA) as the
increased risks associated with housing. This impacts the mortgage
rates on its products, since they are directly tied to its cost of
funds. In the past, the Agency has taken advantage of the tax-exempt
capital markets to both offer low interest rates to first-time
homebuyers in New York State and to also offer additional benefits
such as low down payments and closing cost assistance.
The events of 2008 have thus led the Agency to look to alternative
fixed rate funding sources beyond the capital markets. The Agency has
been working with the GSEs, particularly Fannie Mae, to structure
programs that would allow the Agency to pass through its mortgage
products to the GSEs, thereby generating an alternative funding
source. Rather than bonding to obtain funds to buy mortgages from
participating lenders under its programs, SONYMA would enter into
agreements with these GSEs to sell them the mortgages. SONYMA has
entered into agreements with Fannie Mae that would allow it to
structure programs that provide homeowners with the benefits of
SONYMA'S down payment and closing assistance programs, and other
benefits, in combination with Fannie Mae programs.
This approach has gained heightened importance in recent weeks as the
Homeowner Affordability and Stability Plan announced by the White
House on February 18, 2009 included provisions to ensure that Fannie
Mae and Freddie Mac can continue to provide assistance in addressing
problems in the housing market. The White House plan, as well the
plan proposed by the Treasury Department (the Financial Stability
plan) both look to increase the size of the GSEs' retained mortgage
portfolios so that they spend as much as $600 billion for purchasing
GSE mortgage backed securities and GSE debt. This is part of the
overall plan, announced as part of the Homeowner Affordability and
Stability Plan, to have the GSEs support state housing finance
agencies in serving homebuyers.
The reason for the proposed amendment is to specifically permit
servicing banks to take advantage of the tax credit offered under
Section 1456(a) in situations where the mortgage loans would not be
acquired by SONYMA directly from the originating lenders, but would
instead be acquired pursuant to a SONYMA program that would involve
Fannie Mae. It is crucial for SONYMA'S programs that its servicing
banks are able to take advantage of the servicing tax credit. The
savings are substantial and are reflected in SONYMA's mortgage rates.
In the current environment, where Fannie Mae programs provide the
only efficient method for SONYMA to access the capital markets,
ensuring that the credit continues to be available is of great
importance to SONYMA.

FISCAL IMPLICATIONS:
Additional tax revenue may be lost due to the
expansion of the tax credit.

EFFECTIVE DATE:
The act takes effect immediately.

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

                                  1245

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                               (PREFILED)

                             January 9, 2013
                               ___________

Introduced  by  Sen. PERKINS -- read twice and ordered printed, and when
  printed to be committed to the Committee on Investigations and Govern-
  ment Operations

AN ACT to amend the tax law, in  relation  to  the  credit  for  serving
  certain mortgages

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

  Section 1. Subsection (a) of section 1456 of the tax law, as added  by
chapter 167 of the laws of 1972, is amended to read as follows:
  (a)  Credit for servicing certain mortgages. Every bank, as defined in
section two thousand four hundred two of  the  public  authorities  law,
which  shall  have  entered  into  a contract with the state of New York
mortgage agency to service mortgages acquired by such agency pursuant to
the state of New York mortgage agency act OR  MORTGAGES  ACQUIRED  BY  A
BANK IN CONNECTION WITH ANY PROGRAM OF THE AGENCY, FOR SALE TO OR TRANS-
FER  IN  EXCHANGE  FOR  A  MORTGAGE  BACKED SECURITY TO BE ISSUED BY THE
FEDERAL NATIONAL MORTGAGE ASSOCIATION, shall have credited to it annual-
ly to apply upon or in lieu of the payment of any tax to which it may be
subject under this article an amount equal to two and  ninety-three  one
hundredths  percentum  of  the total principal and interest collected by
the bank during its taxable year on each such mortgage secured by a lien
on real estate improved  by  a  one-family  to  four-family  residential
structure  and  an  amount  equal  to the interest collected by the bank
during its taxable year on each such mortgage secured by a lien on  real
property  improved  by  a structure occupied as the residence of five or
more families living independently of each other, multiplied by a  frac-
tion  the denominator of which shall be the interest rate payable on the
mortgage (computed to five decimal places) and the  numerator  of  which
shall  be  .00125 in the case of such a mortgage acquired by such agency
for less than one million dollars, and .00100 in  the  case  of  such  a

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD04240-01-3

S. 1245                             2

mortgage  acquired  by  such  agency  for  one  million dollars or more;
provided, however, that there shall in no case be credited to  any  such
bank  an  amount  in  excess  of the amount due from such bank for taxes
payable  to  the state under this article for the taxable year for which
such credit is given. In computing such tax credit for the servicing  of
mortgages  on one-family to four-family residential structures, the bank
shall be entitled to no credit for the  collection  of  curtailments  or
payments  in  discharge  of  any such mortgage. For the purposes of this
section, (a) a "curtailment" shall mean amounts paid by  mortgagors  (1)
in excess of the monthly constant due during the month of collection and
(2) in reduction of the unpaid principal balance of the mortgage; in the
absence of clear evidence to the contrary, amounts paid in excess of the
monthly  constant  due during the month of collection shall be deemed to
be in reduction of the unpaid principal balance of the mortgage; and (b)
"monthly constant" shall mean the amount of principal and interest which
is due and payable according to the mortgage documents on each  periodic
payment date.
  S 2. This act shall take effect immediately.

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