NY State Senate Bill 2009-S6113

Archive: Last Bill Status - In Senate Committee Corporations, Authorities And Commissions Committee

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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Date of Action	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 06, 2010	referred to corporations, authorities and commissions
Aug 03, 2009	referred to rules

2009-S6113 (ACTIVE) - Details

Current Committee:: Senate Corporations, Authorities And Commissions
Law Section:: Public Authorities Law
Laws Affected:: Amd §2402, Pub Auth L (as proposed in S. 5551 and A. 5753)

2009-S6113 (ACTIVE) - Summary

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 or a government sponsored enterprise and is made at the same time as a first lien securing a loan purchased by the agency.

2009-S6113 (ACTIVE) - Sponsor Memo

                                 BILL NUMBER:  S6113

 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 :

This bill corrects an unintended omission in recently enacted
legislation that authorized the State of New York Mortgage Agency
("SONYMA") to purchase second mortgage loans under certain limited
circumstances, and to insure such second mortgage loans. Text was
omitted that would have authorized SONYMA to purchase second mortgage
loans in situations where the first mortgage loan was not also
purchased by SONYMA but was instead purchased by a
government-sponsored enterprise (GSE).

 SUMMARY OF PROVISIONS :

Section 1 of the bill adds 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) is made at the
same time as a mortgage loan purchased by a government-sponsored
enterprise (GSE).

Section 2 of the bill conforms the definition of "mortgage" to that
described above.

Section 3 of the bill provides for an immediate effective date.

 EXISTING LAW :

SONYMA currently has the authority to purchase and insure second lien
mortgages. However, the definition of "mortgage" set forth in PAL
§2402(5) does not allow SONYMA to purchase or insure second lien
mortgage loans made simultaneously as first mortgages to be purchased
by GSEs.

 JUSTIFICATION :

This bill would authorize SONYMA to purchase and insure second
mortgages in the following limited circumstance: where the second
mortgage is made simultaneously and with respect to the same secured
property as a first or senior mortgage that is purchased by a GSE.

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 take advantage of GSE programs
thereby generating an alternative source of mortgage funding.

SONYMA has entered into an agreement with Fannie Mae which will allow
first time home buyers to take advantage of the special pricing and
certain underwriting advantages offered by the GSE to state housing
agencies like SONYMA. Unless SONYMA amends its statute to allow it to
fund second loans made simultaneously as first loans purchased by
GSEs, however, it will not be able to take advantage of the agreement
reached with Fannie Mae or future programs with GSE involvement.
Under the agreement with Fannie Mae, SONYMA can make closing cost
and/or down payment assistance loans in connection with a non-SONYMA
first mortgage loans made at the same time, and purchased by Fannie
Mae. Under current law, SONYMA can only make second loans on loans
that are made at the same time as first mortgages purchased by SONYMA.
The GSEs will not accept loans which carry co-first liens for closing
cost assistance or down payment assistance. They can only accept them
if the assistance is made in the form of second liens.

Unless SONYMA amends its statute to allow it to fund second loans in
connection with a first mortgage purchased by a GSE, it will not be
able to take advantage of the agreement reached with Fannie Mae or
future programs with GSE involvement. This is the case because closing
cost or down payment assistance is a key component to any program that
SONYMA offers. Under the current statutory language, SONYMA can fund
closing cost or down payment assistance on a co-first lien basis only,
since it cannot take a secondary position. They can only accept them
if the assistance is made in the form of second liens. SONYMA would
thus be shut out from offering a program for first-time homebuyers
where a GSE will purchase the first mortgage and in cases where
closing cost or down payment assistance is involved.

In order to be in position to take advantage of the increased role of
GSEs, SONYMA will need to amend its statute to eliminate the
prohibition on funding second lien mortgages. The amendment would
authorize SONYMA to purchase second mortgages made simultaneously as a
mortgage by a GSE.

 LEGISLATIVE HISTORY :

During the 2003 through 2007 legislative sessions, respectively, a
similar version of the bill (in the 2007 Legislative Session, S.375)
was referred or committed to the Senate Corporations, Authorities and
Commissions Committee. In 2009 legislation was passed that allowed for
the SONYMA second lien but inadvertently excluded the GSE language.

 FISCAL IMPLICATIONS :

None.

 LOCAL FISCAL IMPLICATIONS :

None.

 EFFECTIVE DATE :
The act takes effect immediately.

2009-S6113 (ACTIVE) - Bill Text download pdf

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

                                  6113

                       2009-2010 Regular Sessions

                            I N  S E N A T E

                             August 3, 2009
                               ___________

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

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 section 1 of a chapter of the laws of 2009,  amending
the  public  authorities  law relating to the powers of the state of New
York mortgage agency, as proposed in legislative  bills  numbers  S.5551
and A.5753, 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 OR BY A GOVERNMENT SPONSORED ENTERPRISE
pursuant to [its] THE AGENCY'S 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.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD14608-02-9

S. 6113                             2

  For the purposes of this title and of section one hundred  ninety  and
subsection (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 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 bene-
fits of such cooperative ownership, and containing such terms and condi-
tions as the agency may approve.
  S 2. Subdivision 5 of section 2402 of the public authorities  law,  as
amended  by  section  2  of  a chapter of the laws of 2009, amending the
public authorities law relating to the powers of the state of  New  York
mortgage  agency,  as  proposed  in legislative bills numbers S.5551 and
A.5753, 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 OR BY A GOVERNMENT  SPONSORED  ENTERPRISE
pursuant to [its] THE AGENCY'S 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. This act shall take effect on the  same  date  and  in  the  same
manner as a chapter of the laws of 2009, amending the public authorities
law  relating to the powers of the state of New York mortgage agency, as
proposed in legislative bills numbers S.5551 and A.5753, takes effect.

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Senate Bill S6113

Sponsored By

Archive: Last Bill Status - In Senate Committee Corporations, Authorities And Commissions Committee

Actions

2009-S6113 (ACTIVE) - Details

2009-S6113 (ACTIVE) - Summary

2009-S6113 (ACTIVE) - Sponsor Memo

2009-S6113 (ACTIVE) - Bill Text download pdf

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Sponsored By

Pedro Espada Jr.

Archive: Last Bill Status - In Senate Committee Corporations, Authorities And Commissions Committee

Actions

2009-S6113 (ACTIVE) - Details

2009-S6113 (ACTIVE) - Summary

2009-S6113 (ACTIVE) - Sponsor Memo

2009-S6113 (ACTIVE) - Bill Text download pdf

Comments