Senate Bill S3699

                                 BILL NUMBER:  S3699

 TITLE OF BILL :

An act to amend the public authorities law, in relation to the powers
of the state of New York mortgage agency


 PURPOSE OF THE BILL :

The bill would grant the State of New York Mortgage Agency ("SONYMA")
authority to sell its mortgages at private sales.

 SUMMARY OF PROVISIONS :

Section 1 of the bill amends Section 2404(9) of the Public Authorities
Law to remove the limitation on the Agency's authority to sell
mortgages at private sales.

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

 EXISTING LAW :

Under current law, SONYMA can only sell mortgages in private sales to
an agency of the federal government, the federal national mortgage
association or a bank from which it had originally purchased the
              

loans.

 PRIOR LEGISLATIVE HISTORY :

None.

 STATEMENT IN SUPPORT :

The current global credit and liquidity crisis has had a severe impact
on the way SONYMA funds its programs. The disruption in the short term
debt markets, resulting in higher interest rates generally, and
shutting off access to the capital markets for extended periods of
time, has impacted the bond issuance process at the Agency.

As a result, over the last few months SONYMA has found itself in an
unprecedented situation that has had severe consequences for the way
SONYMA finances its loan programs: it has been unable to use the
capital markets when necessary to issue bonds to fund its programs.

SONYMA's mortgage programs are continuously available to mortgagors
throughout New York State. Qualifying mortgage loans made to low and
moderate income homebuyers are delivered to SONYMA by its
participating banks on a weekly basis for purchase by SONYMA, at
stated rates of interest. SONYMA funds the loan purchases primarily
through the issuance of tax-exempt bonds in the capital markets.
Throughout its history, SONYMA has never been precluded from issuing
bonds on a regular basis and when needed to fund bond purchases

This fall, for the first time, SONYMA was not able to schedule a bond
issuance to fund its mortgages, due to the credit crisis.  Instead,
SONYMA has had to use excess available funds, which would normally be
used to subsidize programs to acquire its mortgage loans. Only
recently, as the crisis has eased, has SONYMA been able to come to
market with a bond issue that was not as large as SONYMA would have
expected.

Additionally, SONYMA, like other housing bond issuers, depends on
issuing a certain amount of variable rate bonds as part of its bond
issues. This device allows it to lower overall costs.  An effect of
the credit crisis has been to make variable rate bonds both more
expensive and less available to issuers, primarily due to the dearth
of liquidity facility providers. These entities provide back-up for
SONYMA in cases where variable rate bonds are tendered by bondholders.

The lack of capital market access, plus the increased costs and
lessened liquidity for variable rate bonds make it imperative for
SONYMA to avail itself of alternative ways of acquiring funds to pay
for its mortgage loan commitments.

This proposal would allow SONYMA to sell its loans to banks or other
entities, during times when the Agency is unable to issue bonds, or
when bonds are not the best financing option. The mortgages would be
sold at par. A number of New York State lenders have expressed
interest in purchasing SONYMA loans for their own portfolios.
Typically the best execution for SONYMA is to bond for its mortgage
acquisitions, but when access to capital markets is negatively
impacted, it is prudent to have alternate sources of mortgage
acquisitions.

 BUDGET IMPLICATIONS :

None.

 EFFECTIVE DATE :
The act takes effect immediately.