NY State Senate Bill 2009-S5551

Senate Bill S5551

Signed By Governor

2009-2010 Legislative Session

Provides that the term "mortgage" shall also include a loan owed to a bank secured by a second lien on a fee simple or leasehold estate in real property located in the state

download bill text pdf

Archive: Last Bill Status Via A5753 - Signed by Governor

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Actions

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Sep 16, 2009	signed chap.432
Sep 04, 2009	delivered to governor
Jul 16, 2009	returned to assembly passed senate 3rd reading cal.624 substituted for s5551
Jul 16, 2009	substituted by a5753
Jun 08, 2009	advanced to third reading
Jun 04, 2009	2nd report cal.
Jun 03, 2009	1st report cal.624
May 15, 2009	referred to corporations, authorities and commissions

Votes

- Jul 16, 2009 - Floor Vote
  A5753
  
  58
  
  Aye
  
  0
  
  Nay
  
  0
  
  Absent
  
  4
  
  Excused
  
  0
  
  Abstained
  - - Floor Vote: Jul 16, 2009
      
      aye (58)
      
      Adams
      
      Addabbo Jr.
      
      Alesi
      
      Aubertine
      
      Bonacic
      
      Breslin
      
      DeFrancisco
      
      Dilan
      
      Duane
      
      Espada
      
      Farley
      
      Flanagan
      
      Foley
      
      Fuschillo
      
      Golden
      
      Griffo
      
      Hannon
      
      Hassell-Thompson
      
      Huntley
      
      Johnson
      
      Klein
      
      Krueger
      
      LaValle
      
      Lanza
      
      Larkin
      
      Leibell
      
      Libous
      
      Little
      
      Marcellino
      
      Maziarz
      
      McDonald
      
      Monserrate
      
      Montgomery
      
      Morahan
      
      Nozzolio
      
      Onorato
      
      Oppenheimer
      
      Padavan
      
      Parker
      
      Perkins
      
      Ranzenhofer
      
      Robach
      
      Saland
      
      Sampson
      
      Savino
      
      Schneiderman
      
      Serrano
      
      Seward
      
      Skelos
      
      Smith
      
      Stachowski
      
      Stavisky
      
      Stewart-Cousins
      
      Thompson
      
      Valesky
      
      Volker
      
      Winner
      
      Young
      
      excused (4)
      
      Diaz
      
      Johnson
      
      Kruger
      
      Squadron

co-Sponsors

2009-S5551 (ACTIVE) - Details

See Assembly Version of this Bill:: A5753
Law Section:: Public Authorities Law
Laws Affected:: Amd §§2402, 2405, 2405-b & 2428, Pub Auth L

2009-S5551 (ACTIVE) - Summary

Provides that the term "mortgage" shall also include a loan owed to a bank secured by a second lien on a fee simple or leasehold estate in real property located in the state and improved by a residential structure, whether or not insured or guaranteed by the United States of America or any agency thereof, provided, however, that such second lien secures a loan purchased by the agency and is made at the same time as a first lien securing a loan purchased by the agency.

2009-S5551 (ACTIVE) - Sponsor Memo

                                 BILL NUMBER:  S5551

 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 BILL :

The purpose of this proposed bill is to authorize State of New York
Mortgage Agency ("SONYMA") to (a) purchase second mortgage loans to
provide borrowers of SONYMA first mortgage loans with down payment
and/or closing cost assistance under certain limited circumstances,
and (b) to insure such second mortgage loans.

 SUMMARY OF PROVISIONS :

Bill §1 expands the definition of "mortgage" set forth in Public
Authorities Law ("PAL") §2402(5) to include mortgages secured by a
second lien in cases where the second lien: (i) secures a mortgage
loan purchased by SONYMA, and (ii) is made at the same time as a first
lien securing a mortgage loan purchased by SONYMA pursuant to its
programs or is made at the same time as a new housing loan purchased
by SONYMA pursuant to PAL §2405-c.

Bill §2 amends PAL §2402(5) as described in Bill §1 in the event of

the expiration of the amendment to PAL §2402(5) set forth in Bill §1.

Bill §3 amends PAL §2405(7)(e) to conform the definition of mortgage
as set forth in Bill §1 with respect to bank covenants to SONYMA in
connection with SONYMA's forward commitment program.

Bill §4 amends PAL §2405(7)(e) as described in Bill §3 in the event of
the expiration of the amendment to PAL §2405(7)(e) set forth in Bill
§3.

Bill §5 amends PAL §2405-b(8)(f) to conform the definition of mortgage
as set forth in Bill §1 with respect to bank covenants to SONYMA in
connection with SONYMA's purchase-out-of-portfolio program.

Bill §6 amends PAL §2428(4) to allow the Mortgage Insurance Fund (MIF)
to insure second mortgages purchased by SONYMA.

Bill §7 amends PAL §2428(4) as described in Bill §6 in the event of
the expiration of the amendment to PAL §2428(4) set forth in Bill §6.

Bill §8 provides for an immediate effective date.

 EXISTING LAW :

SONYMA does not currently have the authority to purchase mortgages for
second lien purposes or to insure such mortgages. Under the definition
of "mortgage" set forth in PAL §2402(5), the definition of mortgage in
SONYMA's programs is limited to mortgages secured by first liens.

 LEGISLATIVE HISTORY :

A9037 of the 2001/02 legislative session
A8029 of the 2003/04 legislative session
A8266 of the 2005/06 legislative session
A6999 of the 2007/08 legislative session

 STATEMENT IN SUPPORT :

SONYMA is seeking the authority to purchase second mortgages in the
following limited circumstance: (1) the second mortgage secures a loan
purchased by SONYMA; (2) the second mortgage is made at the same time
and with respect to the same secured property as a first or senior
mortgage that is secured by a loan purchased by SONYMA pursuant to its
programs; and (3) the borrower shall contribute from his or her own
verifiable funds an amount not less than such percentage as the Agency
shall determine, of the lower of the purchase price or appraised value
of the property subject to the first lien. It has been a requirement
of SONYMA's programs that eligible borrowers contribute from his or
her own verifiable funds an amount not less than three percent of the
lower of the purchase price or appraised value of the property subject
to the first lien.

This amendment will permit SONYMA to more efficiently structure
programs which feature closing cost and or down-payment assistance to
borrowers whose underlying mortgage loans are financed by SONYMA under
its various programs. Down-payment and closing cost assistance-type
programs would represent an important adjunct of SONYMA's below market
interest rate financing and are intended to address the critical
problem of the limited cash resources available to otherwise qualified
low and moderate income SONYMA applicants.

This amendment would facilitate the operation of SONYMA products which
which have provided closing cost and/or down payment assistance to
low-income first time home buyers with limited cash reserves. These
loans would be secured by a second lien on the homeowner's property.

SONYMA's flexibility in offering these programs is currently hindered
by the fact that SONYMA has no statutory authority to offer second
lien financing, except in connection with home improvement loans. This
forces SONYMA to configure its down-payment or closing cost assistance
programs using a burdensome and administratively cumbersome co-first
lien mortgage structure. Such a structure adds unnecessary complexity
which is confusing to many borrowers, county clerks and lenders.  In
some cases, county clerks have refused to record such instruments
unless altered to their satisfaction.  Also, because the co-first lien
and the underlying first mortgage have different term lengths,
extinguishing the co-first lien at maturity has proved troublesome.
As such, borrowers have difficulty obtaining second and home equity
mortgages due to the co-first lien not being removed from the public
record.  Additionally, the legal and procedural complexities inherent
in structuring co-first mortgage arrangements makes it more difficult
for SONYMA to put together and manage.

 BUDGET IMPLICATIONS :

None.

 EFFECTIVE DATE :
Immediate upon passage of the bill.

2009-S5551 (ACTIVE) - Bill Text download pdf

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

                                  5551

                       2009-2010 Regular Sessions

                            I N  S E N A T E

                              May 15, 2009
                               ___________

Introduced  by  Sen.  ESPADA -- read twice and ordered printed, and when
  printed to be committed to the Committee on Corporations,  Authorities
  and Commissions

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

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

  Section 1. Subdivision 5 of section 2402  of  the  public  authorities
law,  as  amended by chapter 353 of the laws of 1984, is amended to read
as follows:
  (5) "Mortgage". A loan owed to a bank secured by a first lien on a fee
simple or leasehold estate in real property located  in  the  state  and
improved  by  a residential structure, whether or not insured or guaran-
teed by the United States of America or any agency thereof.    THE  TERM
"MORTGAGE"  SHALL ALSO INCLUDE A LOAN OWED TO A BANK SECURED BY A SECOND
LIEN ON A FEE SIMPLE OR LEASEHOLD ESTATE IN REAL PROPERTY LOCATED IN THE
STATE AND IMPROVED BY A RESIDENTIAL STRUCTURE, WHETHER OR NOT INSURED OR
GUARANTEED BY THE UNITED  STATES  OF  AMERICA  OR  ANY  AGENCY  THEREOF,
PROVIDED,  HOWEVER,  THAT SUCH SECOND LIEN: (A) SECURES A LOAN PURCHASED
BY THE AGENCY, AND (B) IS MADE AT THE SAME TIME AS A FIRST LIEN SECURING
A LOAN PURCHASED BY THE AGENCY PURSUANT TO ITS PROGRAMS OR  IS  MADE  AT
THE  SAME TIME AS A NEW HOUSING LOAN PURCHASED BY THE AGENCY PURSUANT TO
SECTION TWENTY-FOUR HUNDRED FIVE-C OF THIS PART, PROVIDED THAT,  IN  THE
CASE  OF ANY SECOND LIEN, THE MORTGAGOR SHALL BE OBLIGATED TO CONTRIBUTE
FROM HIS OR HER OWN VERIFIABLE  FUNDS  AN  AMOUNT  NOT  LESS  THAN  SUCH
PERCENTAGE  AS  THE AGENCY SHALL DETERMINE, OF THE LOWER OF THE PURCHASE
PRICE OR APPRAISED VALUE OF THE PROPERTY  SUBJECT  TO  THE  FIRST  LIEN.
"Real property" as used in this subdivision shall include air rights.
  For  the  purposes of this title and of section one hundred ninety and
subsection [a] (A) of section one thousand four hundred fifty-six of the
tax law, "mortgage" shall include housing loans as defined below. Except
for the purposes of subdivision  seven  of  section  two  thousand  four
hundred  five and subdivision eight of section two thousand four hundred
five-b of this [title] PART, "mortgage" shall also include a  loan  owed

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD08856-01-9

S. 5551                             2

to  a bank by an individual borrower incurred for the purpose of financ-
ing the purchase of certificates of stock or other evidence of ownership
of an interest in, and a proprietary lease from, a  cooperative  housing
corporation formed for the purpose of the cooperative ownership of resi-
dential  real  estate in the state, secured by an assignment or transfer
of the benefits of such cooperative ownership, and containing such terms
and conditions as the agency may approve.
  S 2. Subdivision 5 of section 2402 of the public authorities  law,  as
separately  amended  by  chapters  376  and 1023 of the laws of 1971, is
amended to read as follows:
  (5) "Mortgage". A loan owed to a bank secured by a first lien on a fee
simple or leasehold estate in real property located  in  the  state  and
improved  by  a residential structure, whether or not insured or guaran-
teed by the United States of America or any agency thereof.    THE  TERM
"MORTGAGE"  SHALL ALSO INCLUDE A LOAN OWED TO A BANK SECURED BY A SECOND
LIEN ON A FEE SIMPLE OR LEASEHOLD ESTATE IN REAL PROPERTY LOCATED IN THE
STATE AND IMPROVED BY A RESIDENTIAL STRUCTURE, WHETHER OR NOT INSURED OR
GUARANTEED BY THE UNITED  STATES  OF  AMERICA  OR  ANY  AGENCY  THEREOF,
PROVIDED,  HOWEVER,  THAT SUCH SECOND LIEN: (A) SECURES A LOAN PURCHASED
BY THE AGENCY, AND (B) IS MADE AT THE SAME TIME AS A FIRST LIEN SECURING
A LOAN PURCHASED BY THE AGENCY PURSUANT TO ITS PROGRAMS OR  IS  MADE  AT
THE  SAME TIME AS A NEW HOUSING LOAN PURCHASED BY THE AGENCY PURSUANT TO
SECTION TWENTY-FOUR HUNDRED FIVE-C OF THIS PART, PROVIDED THAT,  IN  THE
CASE  OF ANY SECOND LIEN, THE MORTGAGOR SHALL BE OBLIGATED TO CONTRIBUTE
FROM HIS OR HER OWN VERIFIABLE  FUNDS  AN  AMOUNT  NOT  LESS  THAN  SUCH
PERCENTAGE  AS  THE AGENCY SHALL DETERMINE, OF THE LOWER OF THE PURCHASE
PRICE OR APPRAISED VALUE OF THE PROPERTY  SUBJECT  TO  THE  FIRST  LIEN.
"Real property" as used in this subdivision shall include air rights.
  Except  for  the purposes of subdivision seven of section two thousand
four hundred five OF THIS PART, "mortgage" shall  also  include  a  loan
owed  to  a  bank  by an individual borrower incurred for the purpose of
financing the purchase of certificates of stock  or  other  evidence  of
ownership of an interest in, and a proprietary lease from, a cooperative
housing  corporation formed for the purpose of the cooperative ownership
of residential real estate in the state, secured  by  an  assignment  or
transfer  of  the benefits of such cooperative ownership, and containing
such terms and conditions as the agency may approve.
  S 3. Paragraph (e) of subdivision 7 of  section  2405  of  the  public
authorities  law,  as  amended  by  chapter  915 of the laws of 1982, is
amended to read as follows:
  (e) the mortgage constitutes a valid first lien OR SECOND LIEN on  the
real  property  described  to  the agency IN ACCORDANCE WITH SUBDIVISION
FIVE OF SECTION TWENTY-FOUR HUNDRED TWO OF THIS  PART  subject  only  to
real  property  taxes  not  yet due, installments of assessments not yet
due, and easements and restrictions of record  which  do  not  adversely
affect,  to  a material degree, the use or value of the real property or
improvements thereon;
  S 4. Paragraph (e) of subdivision 7 of  section  2405  of  the  public
authorities  law,  as  amended  by  chapter 1023 of the laws of 1971, is
amended to read as follows:
  (e) the mortgage constitutes a valid first lien OR SECOND LIEN on  the
real  property  described  to  the agency IN ACCORDANCE WITH SUBDIVISION
FIVE OF SECTION TWENTY-FOUR HUNDRED TWO OF THIS  PART  subject  only  to
real  property  taxes  not  yet due, installments of assessments not yet
due, and easements and restrictions of record  which  do  not  adversely

S. 5551                             3

affect,  to  a material degree, the use or value of the real property or
improvements thereon;
  S  5.  Paragraph  (f) of subdivision 8 of section 2405-b of the public
authorities law, as added by chapter 915 of the laws of 1982, is amended
to read as follows:
  (f) the mortgage constitutes a valid first lien OR SECOND LIEN on  the
real  property  described  to  the agency IN ACCORDANCE WITH SUBDIVISION
FIVE OF SECTION TWENTY-FOUR HUNDRED TWO OF THIS  PART  subject  only  to
real  property  taxes  not  yet due, installments of assessments not yet
due, and easements and restrictions of record  which  do  not  adversely
affect, to a material degree, the use or value [or] OF the real property
or improvements thereon;
  S  6.  Subdivision 4 of section 2428 of the public authorities law, as
amended by chapter 555 of the laws  of  1989,  is  amended  to  read  as
follows:
  4.  To  be  eligible for insurance under this article, a mortgage loan
shall (a) (i) be a first lien of the kind which  is  commonly  given  to
secure advances on, or the unpaid purchase price of, real property under
the laws of the state together with any credit instrument secured there-
by, PROVIDED, HOWEVER, THAT A MORTGAGE LOAN MAY BE A SECOND LIEN IF SUCH
MORTGAGE  LOAN  WAS  PURCHASED  BY  THE  AGENCY or (ii) be secured by an
assignment or transfer of stock certificates or other evidence of owner-
ship interest of the borrower in, and a proprietary lease from, a corpo-
ration formed for the purpose of the cooperative ownership  of  residen-
tial   real  estate  in  the  state;  (b)  secure  a  rehabilitation  or
preservation loan on real property held in fee simple or on a  leasehold
under  a proprietary lease or a lease having a period of years to run at
the time the mortgage is insured under this article of at  least  twenty
per centum greater duration than the remaining term of the mortgage; (c)
contain  terms  with  respect  to prepayment, insurance, repairs, alter-
ations, payment of taxes, special assessments, service [charge] CHARGES,
default reserves, delinquency charges,  foreclosure  proceedings,  addi-
tional  and secondary liens, and such other matters as the agency may in
its discretion prescribe; (d) be accompanied by certificates, issued  by
such  officers  of  the  mortgage  financial  institutions,  independent
appraisers or other persons as the agency may require,  certifying  that
(i) where appropriate, the annual income to be derived from the property
equals  not  less  than  one  hundred  and five per centum of the annual
charges and expenses, including provision for reserves, satisfactory  to
the  agency, for the amortization of subordinate mortgage loans over the
remaining terms of such loans notwithstanding  the  provisions  thereof;
(ii)  the remaining useful life of the property is greater than the term
of the mortgage; and (iii) the property does not contain any substantial
violations of local building maintenance and construction codes,  except
that  in  the  case of a loan made to the owner of a property containing
any such violations, the agency may insure or commit to insure such loan
if the mortgagee and the owner have submitted a  plan,  satisfactory  to
the  agency to eliminate such violations and the issuance of such insur-
ance shall be conditioned on removal of such violations to the satisfac-
tion of the local code enforcement agency; and (e)  satisfy  such  addi-
tional  terms  and  conditions  as  the  agency  may prescribe. For pool
insurance, the requirements of paragraph (b) of this  subdivision  shall
not be applicable.
  S  7.  Subdivision 4 of section 2428 of the public authorities law, as
amended by chapter 354 of the laws  of  1984,  is  amended  to  read  as
follows:

S. 5551                             4

  4.  To  be  eligible for insurance under this article, a mortgage loan
shall (a) (i) be a first lien of the kind which  is  commonly  given  to
secure advances on, or the unpaid purchase price of, real property under
the laws of the state together with any credit instrument secured there-
by, PROVIDED, HOWEVER, THAT A MORTGAGE LOAN MAY BE A SECOND LIEN IF SUCH
MORTGAGE  LOAN  WAS  PURCHASED  BY  THE  AGENCY or (ii) be secured by an
assignment or transfer of stock certificates or other evidence of owner-
ship interest of the borrower in, and a proprietary lease from, a corpo-
ration formed for the purpose of the cooperative ownership  of  residen-
tial   real  estate  in  the  state;  (b)  secure  a  rehabilitation  or
preservation loan on real property held in fee simple or on a  leasehold
under  a proprietary lease or a lease having a period of years to run at
the time the mortgage is insured under this article of at  least  twenty
per centum greater duration than the remaining term of the mortgage; (c)
contain  terms  with  respect  to prepayment, insurance, repairs, alter-
ations, payment of taxes, special assessments, service [charge] CHARGES,
default reserves, delinquency charges,  foreclosure  proceedings,  addi-
tional  and secondary liens, and such other matters as the agency may in
its discretion prescribe; (d) be accompanied by certificates, issued  by
such  officers  of  the  mortgage  financial  institutions,  independent
appraisers or other persons as the agency may require,  certifying  that
(i) where appropriate, the annual income to be derived from the property
equals  not  less  than  one  hundred  and five per centum of the annual
charges and expenses, including provision for reserves, satisfactory  to
the  agency, for the amortization of subordinate mortgage loans over the
remaining terms of such loans notwithstanding  the  provisions  thereof;
(ii)  the remaining useful life of the property is greater than the term
of the mortgage; and (iii) the property does not contain any substantial
violations of local building maintenance and construction codes,  except
that  in  the  case of a loan made to the owner of a property containing
any such violations, the agency may insure or commit to insure such loan
if the mortgagee and the owner have submitted a  plan,  satisfactory  to
the  agency to eliminate such violations and the issuance of such insur-
ance shall be conditioned on removal of such violations to the satisfac-
tion of the local code enforcement agency; and (e)  satisfy  such  addi-
tional terms and conditions as the agency may prescribe.
  S 8. This act shall take effect immediately, provided that:
  (a)  the  amendments  to  subdivision  5 of section 2402 of the public
authorities law made by section one of this act shall be subject to  the
expiration  and  reversion of such subdivision pursuant to section 16 of
chapter 915 of the laws of 1982, as amended, when  upon  such  date  the
provisions of section two of this act shall take effect;
  (b)  the  amendments to paragraph (e) of subdivision 7 of section 2405
of the public authorities law made by section three of this act shall be
subject to the expiration and reversion of such subdivision pursuant  to
section  16  of  chapter  915 of the laws of 1982, as amended, when upon
such date the provisions of section four of this act shall take effect;
  (c) the amendments to paragraph (f) of subdivision 8 of section 2405-b
of the public authorities law made by section five of this act shall not
affect the repeal of such section and shall be  deemed  repealed  there-
with; and
  (d)  the  amendments  to  subdivision  4 of section 2428 of the public
authorities law made by section six of this act shall be subject to  the
expiration  and  reversion of such subdivision pursuant to section 19 of
chapter 555 of the laws of 1989, as amended, when  upon  such  date  the
provisions of section seven of this act shall take effect.

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Senate Bill S5551

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Sponsored By

Pedro Espada Jr.