senate Bill S759

2011-2012 Legislative Session

Authorizes the purchase of rehabilitation mortgages by the state of New York mortgage agency

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Archive: Last Bill Status - In Committee


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

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Jan 04, 2012 referred to corporations, authorities and commissions
Jan 05, 2011 referred to corporations, authorities and commissions

S759 - Bill Details

See Assembly Version of this Bill:
A2512
Current Committee:
Senate Corporations, Authorities And Commissions
Law Section:
Public Authorities Law
Laws Affected:
Amd §2402, add §2405-f, Pub Auth L
Versions Introduced in 2009-2010 Legislative Session:
S4680, A4366

S759 - Bill Texts

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Authorizes the state of New York mortgage agency to purchase rehabilitation mortgages from banks within the state during periods when there is an inadequate supply of credit available for new residential mortgages or available for such loans at carrying charges within the financial means of persons and families of low and moderate income.

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BILL NUMBER:S759

TITLE OF BILL:
An act
to amend the public authorities law, in relation to authorizing the
state of New York mortgage agency to purchase rehabilitation mortgages

PURPOSE:
To authorize the State of New York Mortgage Agency to
purchase rehabilitation mortgages from banks within the State.

SUMMARY OF PROVISIONS:
This bill adds a new subdivision (18) to
Section 2402 of the Public Authorities law to define "rehabilitation"
as the repair, alteration, or improvements of a housing accommodation
designed to raise the housing standards therein, and a new
subdivision (19) to Section 2402 of such law to define
"rehabilitation mortgage" as a loan extended by a bank secured by a
mortgage on real property improved by a residential structure for the
financing and rehabilitation of such residential structure. It
further adds a new Section 2405-f to the Public Authorities Law to
authorize the State of New York Mortgage Agency (SONYMA) to purchase
rehabilitation mortgages from banks within the State.

The bill also states that the agency shall require rehabilitation
mortgages to provide that if the borrower is purchasing residential
real property, the estimated cost of the repairs must be at least 25%
of the mortgagor's adjusted basis in the residential real property,
including land. The rehabilitation mortgages must also provide that
if the borrower is purchasing residential real property, the purchase
price plus the estimated cost of the repairs must fall within current
SONYMA regulations pertaining to maximum purchase price. To be
eligible for a rehabilitation mortgage, the residential structure
must be at least 20 years old on the date of the mortgage
application. In addition, any commitment issued by a bank for such
rehabilitation mortgages must provide that the bank approve the cost
and feasibility of the proposed repairs or rehabilitation to the
residential structure and that the bank must monitor ongoing repairs
and rehabilitation through periodic inspections. The lender would
also have to undertake a final inspection.
Furthermore, such mortgages would also have to provide that the
borrower occupy the residential structure as his or her principal
residence within 60 days of the completion of the repair or
rehabilitation work.

The bill further grants SONYMA parallel powers given the agency under
the forward commitment loan program. These powers include the ability
to purchase rehabilitation mortgages from banks as the agency shall
determine and the authority to set the interest rate to be borne by
rehabilitation mortgages, provided that such rate is sufficient to
provide for the payment of the agency's bonds and notes. The agency
would also have to require that the lending bank certify that the
mortgage is to an individual borrower and that such bank submit
evidence of the making and, if needed, the servicing of such
rehabilitation payment mortgages.


The bill further provides that the agency require as a condition of
Purchase of any rehabilitation mortgage from a bank that the bank
represent that, the mortgage was not made in satisfaction of an
obligation of the bond under Section 2405 of the Public Authorities
Law; the unpaid principal balance is justly due and owing; the bank
has no notice of the existence of any counterclaim, offset or defense
asserted by the mortgagor or any successor in interest; the mortgage
is evidenced by a bond or promissory note and a mortgage document
which has been properly recorded;
and the mortgage constitutes a valid first lien on the real property.
The agency must also require that, the mortgagor is not in default of
any payment of principal and interest, escrow funds, or real property
taxes; and the improvements to the mortgaged real property are
covered by a valid homeowner's insurance policy.

In addition, each bank would be liable to the agency for any damages
suffered by reason of the untruth of any representation or the breach
of any warranty. Also, the agency need not require the recording of
an assignment of any rehabilitation mortgage purchased by it from a
bank.
Finally, the agency is authorized to require restrictions upon
assumability of the mortgage, default provisions, rights to
accelerate, and other terms applicable to rehabilitation mortgages to
assure the repayment of its bonds and notes and the exemption from
federal income taxes of the interest payable on its bonds and notes.

JUSTIFICATION:
Many communities across the State contain older homes
which have fallen into disrepair. This housing stock represents a
potential source of housing for many new low and moderate income
homebuyers. It is often difficult, though, for these people to obtain
financing from lending institutions to purchase such properties. This
bill would authorize the State of New York Mortgage Agency to provide
this type of financing which will not only help encourage increased
homeownership opportunities but will also lead to the increased
rehabilitation of many older homes throughout the State.

Although this program represents a new concept in lending for SONYMA,
the agency does have experience with programs designed to provide for
the rehabilitation of older structures through its mortgage insurance
program. One should also note that this legislation is modeled after
rehabilitation mortgage programs that currently exist in New Jersey and
Rhode Island.

LEGISLATIVE HISTORY:
2009-10: S.4680 Referred to Corporations, Authorities & Commissions
2007-08: S.407/A.4027 Referred to Corporations, Authorities & Commissions
2006: S.6252/A.9607 Referred to Corporations, Authorities & Commissions
2005: A.2749 Referred to Housing
2003-04: A.4805 Held in Housing
2002: A.10122 Held in Housing
2001: A.3979 Referred to Housing
1999-00: A.3862 Held in Housing

FISCAL IMPLICATIONS:
Minimal to the State.


EFFECTIVE DATE:
One hundred twentieth day after the bill becomes a law.

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

                                   759

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                               (PREFILED)

                             January 5, 2011
                               ___________

Introduced  by  Sen.  YOUNG  -- 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 authorizing
  the state of New York mortgage agency to purchase rehabilitation mort-
  gages

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

  Section  1.  Section  2402 of the public authorities law is amended by
adding two new subdivisions 18 and 19 to read as follows:
  (18) "REHABILITATION". REPAIRS, ALTERATIONS OR IMPROVEMENTS OF A HOUS-
ING ACCOMMODATION DESIGNED TO RAISE THE HOUSING STANDARDS THEREIN.
  (19) "REHABILITATION MORTGAGE". A LOAN EXTENDED BY A BANK, SECURED  BY
A  MORTGAGE ON REAL PROPERTY IMPROVED BY A RESIDENTIAL STRUCTURE FOR THE
FINANCING AND REHABILITATION OF SUCH RESIDENTIAL STRUCTURE WHICH  OTHER-
WISE  COMPLIES  WITH  THE  CONDITIONS ESTABLISHED BY SECTION TWENTY-FOUR
HUNDRED FIVE-F OF THIS PART.
  S 2. The public authorities law is amended by  adding  a  new  section
2405-f to read as follows:
  S  2405-F. PURCHASE OF REHABILITATION MORTGAGES.  (1) A PURPOSE OF THE
AGENCY SHALL BE TO PURCHASE REHABILITATION MORTGAGES FROM  BANKS  WITHIN
THE  STATE  DURING  PERIODS WHEN THERE IS AN INADEQUATE SUPPLY OF CREDIT
AVAILABLE FOR NEW RESIDENTIAL MORTGAGES OR AVAILABLE FOR SUCH  LOANS  AT
CARRYING  CHARGES  WITHIN THE FINANCIAL MEANS OF PERSONS AND FAMILIES OF
LOW AND MODERATE INCOME.
  IT IS HEREBY FOUND AND DECLARED THAT SUCH  ACTIVITIES  BY  THE  AGENCY
WILL ALLEVIATE A CONDITION IN THIS STATE WHICH IS CONTRARY TO THE PUBLIC
HEALTH, SAFETY AND GENERAL WELFARE AND WHICH HAS CONSTITUTED IN THE PAST
AND  FROM  TIME  TO  TIME  IN THE FUTURE CAN BE EXPECTED TO CONSTITUTE A
PUBLIC EMERGENCY. IT IS FURTHER FOUND AND DECLARED  THAT  SUCH  PURPOSES

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD02628-01-1

S. 759                              2

ARE  IN  ALL  RESPECTS FOR THE BENEFIT OF THE PEOPLE OF THE STATE OF NEW
YORK AND THE AGENCY SHALL BE REGARDED AS PERFORMING AN ESSENTIAL GOVERN-
MENTAL FUNCTION IN CARRYING OUT  ITS  PURPOSES  AND  IN  EXERCISING  THE
POWERS GRANTED BY THIS TITLE.
  (2) (A) THE AGENCY SHALL REQUIRE THAT REHABILITATION MORTGAGES PROVIDE
THAT  THE  ESTIMATED  COST  OF  THE REPAIRS MUST BE AT LEAST TWENTY-FIVE
PERCENT OF THE MORTGAGOR'S ADJUSTED BASIS IN THE RESIDENTIAL REAL  PROP-
ERTY (INCLUDING LAND).
  (B) SUCH REHABILITATION MORTGAGES SHALL ALSO PROVIDE THAT THE PURCHASE
PRICE  PLUS  THE  ESTIMATED COST OF THE REPAIRS MUST FALL WITHIN CURRENT
AGENCY REGULATIONS PERTAINING TO MAXIMUM PURCHASE PRICE. TO BE  ELIGIBLE
FOR  SUCH  MORTGAGES AT LEAST TWENTY YEARS MUST HAVE ELAPSED BETWEEN THE
DATE THE RESIDENTIAL REAL PROPERTY WAS FIRST USED AND  THE  COMMENCEMENT
OF  PHYSICAL  WORK ON SUCH REHABILITATION. TO BE ELIGIBLE FOR SUCH MORT-
GAGES, (I) AT LEAST FIFTY PERCENT OF THE EXISTING EXTERNAL WALLS OF  THE
RESIDENTIAL  STRUCTURE MUST BE RETAINED IN PLACE AS EXTERNAL WALLS, (II)
AT LEAST SEVENTY-FIVE PERCENT OF THE  EXISTING  WALLS  ARE  RETAINED  IN
PLACE  AS  INTERNAL  OR  EXTERNAL WALLS, AND (III) AT LEAST SEVENTY-FIVE
PERCENT OF  THE  EXISTING  INTERNAL  STRUCTURAL  FRAMEWORK  MUST  REMAIN
INTACT.  ANY  COMMITMENT  ISSUED BY A BANK FOR SUCH REHABILITATION MORT-
GAGES SHALL PROVIDE THAT THE BANK SHALL CERTIFY THE COST AND FEASIBILITY
OF THE PROPOSED REPAIRS OR REHABILITATION TO THE  RESIDENTIAL  STRUCTURE
AND  THAT  THE  BANK  SHALL  MONITOR  ONGOING REPAIRS AND REHABILITATION
THROUGH PERIODIC INSPECTIONS AND SHALL PERFORM A FINAL INSPECTION.  SUCH
MORTGAGES  SHALL ALSO PROVIDE THAT THE BORROWER MUST OCCUPY THE RESIDEN-
TIAL STRUCTURE AS HIS OR HER PRINCIPAL RESIDENCE WITHIN  SIXTY  DAYS  OF
THE COMPLETION OF THE REPAIR OR REHABILITATION WORK.
  (3)  THE  AGENCY SHALL PURCHASE REHABILITATION MORTGAGES FROM BANKS AT
SUCH PRICES AND UPON SUCH TERMS AND CONDITIONS AS  IT  SHALL  DETERMINE;
PROVIDED,  HOWEVER,  THAT  THE  TOTAL  PURCHASE  PRICE, EXCLUSIVE OF ANY
AMOUNTS REPRESENTING A REFUND OF COMMITMENT OR OTHER FEES PAID BY A BANK
TO THE AGENCY, FOR ALL MORTGAGES WHICH THE AGENCY  COMMITS  TO  PURCHASE
FROM  A BANK AT ANY ONE TIME SHALL IN NO EVENT BE MORE THAN THE TOTAL OF
THE UNPAID PRINCIPAL BALANCES THEREOF, PLUS ACCRUED INTEREST THEREON.
  (4) IN CONDUCTING ITS PROGRAM OF PURCHASING REHABILITATION  MORTGAGES,
THE  AGENCY  SHALL  BE  GOVERNED  BY  THE PROVISIONS OF PARAGRAPH (B) OF
SUBDIVISION THREE OF SECTION TWENTY-FOUR HUNDRED FIVE OF THIS PART.
  (5) THE AGENCY SHALL REQUIRE AS A CONDITION OF PURCHASE  OF  REHABILI-
TATION  MORTGAGES  FROM BANKS THAT EACH SUCH BANK CERTIFY THAT EACH SUCH
REHABILITATION MORTGAGE IS TO AN INDIVIDUAL BORROWER AND IS IN  ADDITION
TO THE MORTGAGES SUCH CERTIFYING BANK OTHERWISE WOULD HAVE MADE.
  (6)  NOTWITHSTANDING  THE  MAXIMUM  INTEREST  RATE,  IF  ANY, FIXED BY
SECTION 5-501 OF THE GENERAL  OBLIGATIONS  LAW  OR  ANY  OTHER  LAW  NOT
SPECIFICALLY  AMENDING OR APPLICABLE TO THIS SECTION, THE AGENCY MAY SET
THE INTEREST RATE TO BE BORNE BY REHABILITATION MORTGAGES  PURCHASED  BY
THE  AGENCY  FROM BANKS AT A RATE OR RATES WHICH THE AGENCY FROM TIME TO
TIME SHALL DETERMINE TO BE AT LEAST SUFFICIENT, TOGETHER WITH ANY  OTHER
AVAILABLE MONIES, TO PROVIDE FOR THE PAYMENT OF ITS BONDS AND NOTES, AND
REHABILITATION  MORTGAGES BEARING SUCH INTEREST RATE SHALL NOT BE DEEMED
TO VIOLATE ANY SUCH LAW OR TO BE UNENFORCEABLE IF ORIGINATED BY  A  BANK
IN GOOD FAITH PURSUANT TO AN UNDERTAKING WITH THE AGENCY WITH RESPECT TO
THE SALE THEREOF NOTWITHSTANDING ANY SUBSEQUENT FAILURE OF THE AGENCY TO
PURCHASE THE MORTGAGE OR ANY SUBSEQUENT SALE OR DISPOSITION OF THE MORT-
GAGE BY THE AGENCY TO SUCH BANK OR ANY OTHER PERSON.
  (7)  THE  AGENCY  SHALL REQUIRE THE SUBMISSION TO IT BY EACH BANK FROM
WHICH THE AGENCY HAS PURCHASED REHABILITATION MORTGAGES EVIDENCE  SATIS-

S. 759                              3

FACTORY  TO  THE AGENCY OF THE MAKING, AND IF APPLICABLE, THE SERVICING,
OF SUCH REHABILITATION MORTGAGES IN CONFORMITY WITH SUCH  BANK'S  UNDER-
TAKING  WITH  THE  AGENCY  AND  IN CONNECTION THEREWITH MAY, THROUGH ITS
EMPLOYEES  OR  AGENTS  OR  THOSE  OF THE BANKING DEPARTMENT, INSPECT THE
BOOKS AND RECORDS OF ANY SUCH BANK.
  (8) COMPLIANCE BY ANY BANK WITH THE TERMS OF  ITS  AGREEMENT  WITH  OR
UNDERTAKING  TO  THE AGENCY WITH RESPECT TO THE SALE AND, IF APPLICABLE,
THE SERVICING OF REHABILITATION MORTGAGES MAY BE ENFORCED BY  DECREE  OF
THE  SUPREME COURT. THE AGENCY MAY REQUIRE AS A CONDITION OF PURCHASE OF
REHABILITATION MORTGAGES FROM ANY BANK THE CONSENT OF SUCH BANK  TO  THE
JURISDICTION  OF  THE SUPREME COURT OVER ANY SUCH PROCEEDING. THE AGENCY
MAY ALSO REQUIRE AGREEMENT BY ANY BANK, AS A CONDITION OF  THE  AGENCY'S
PURCHASE  OF  REHABILITATION MORTGAGES FROM SUCH BANK, TO THE PAYMENT OF
PENALTIES TO THE AGENCY FOR VIOLATION BY THE BANK OF ITS UNDERTAKINGS TO
THE AGENCY, AND SUCH PENALTIES SHALL BE RECOVERABLE AT THE SUIT  OF  THE
AGENCY.
  (9)  THE  AGENCY SHALL REQUIRE AS A CONDITION OF PURCHASE OF ANY REHA-
BILITATION MORTGAGE FROM A BANK THAT THE BANK REPRESENT AND  WARRANT  TO
THE AGENCY THAT:
  (A)  THE MORTGAGE WAS NOT MADE IN SATISFACTION OF AN OBLIGATION OF THE
BANK UNDER SECTION TWENTY-FOUR HUNDRED FIVE OF THIS PART;
  (B) THE UNPAID PRINCIPAL BALANCE OF THE MORTGAGE AND THE INTEREST RATE
THEREON HAVE BEEN ACCURATELY STATED TO THE AGENCY;
  (C) THE AMOUNT OF THE UNPAID  PRINCIPAL  BALANCE  IS  JUSTLY  DUE  AND
OWING;
  (D)  THE  BANK  HAS  NO  NOTICE  OF THE EXISTENCE OF ANY COUNTERCLAIM,
OFFSET OR DEFENSE ASSERTED BY THE MORTGAGOR OR ANY SUCCESSOR  IN  INTER-
EST;
  (E) THE MORTGAGE IS EVIDENCED BY A BOND OR PROMISSORY NOTE AND A MORT-
GAGE  DOCUMENT  WHICH  HAS  BEEN  PROPERLY RECORDED WITH THE APPROPRIATE
PUBLIC OFFICIAL;
  (F) THE MORTGAGE CONSTITUTES A VALID FIRST LIEN ON THE  REAL  PROPERTY
DESCRIBED TO THE AGENCY 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;
  (G) THE MORTGAGOR IS NOT NOW IN DEFAULT IN THE PAYMENT OF ANY INSTALL-
MENT  OF  PRINCIPAL  OR  INTEREST,  ESCROW FUNDS, REAL PROPERTY TAXES OR
OTHERWISE IN THE PERFORMANCE OF HIS OBLIGATIONS UNDER THE MORTGAGE DOCU-
MENTS AND HAS NOT TO THE KNOWLEDGE OF THE BANK BEEN IN  DEFAULT  IN  THE
PERFORMANCE  OF  ANY  SUCH  OBLIGATION FOR A PERIOD OF LONGER THAN SIXTY
DAYS DURING THE LIFE OF THE MORTGAGE; AND
  (H) THE IMPROVEMENTS TO THE MORTGAGED REAL PROPERTY ARE COVERED  BY  A
VALID  AND SUBSISTING POLICY OF INSURANCE ISSUED BY A COMPANY AUTHORIZED
BY THE SUPERINTENDENT OF INSURANCE TO ISSUE SUCH POLICIES IN  THE  STATE
OF  NEW  YORK  AND PROVIDING FIRE AND EXTENDED COVERAGE TO AN AMOUNT NOT
LESS THAN EIGHTY PERCENT OF THE INSURABLE VALUE OF THE  IMPROVEMENTS  TO
THE MORTGAGED REAL PROPERTY.
  (10)  EACH BANK SHALL BE LIABLE TO THE AGENCY FOR ANY DAMAGES SUFFERED
BY THE AGENCY BY REASON OF THE UNTRUTH  OF  ANY  REPRESENTATION  OR  THE
BREACH  OF  ANY WARRANTY AND, IN THE EVENT THAT ANY REPRESENTATION SHALL
PROVE TO BE UNTRUE WHEN MADE OR IN THE EVENT OF ANY BREACH OF  WARRANTY,
THE BANK SHALL, AT THE OPTION OF THE AGENCY, REPURCHASE THE MORTGAGE FOR
THE ORIGINAL PURCHASE PRICE ADJUSTED FOR AMOUNTS SUBSEQUENTLY PAID THER-
EON, AS THE AGENCY SHALL DETERMINE.

S. 759                              4

  (11) THE AGENCY NEED NOT REQUIRE THE RECORDING OF AN ASSIGNMENT OF ANY
REHABILITATION  MORTGAGE  PURCHASED  BY  IT FROM A BANK PURSUANT TO THIS
SECTION AND SHALL NOT  BE  REQUIRED  TO  NOTIFY  THE  MORTGAGOR  OF  ITS
PURCHASE OF THE MORTGAGE. THE AGENCY SHALL NOT BE REQUIRED TO INSPECT OR
TAKE  POSSESSION  OF  THE  MORTGAGE DOCUMENTS IF THE BANK FROM WHICH THE
REHABILITATION MORTGAGE  IS  PURCHASED  BY  THE  AGENCY  SHALL  ENTER  A
CONTRACT TO SERVICE SUCH MORTGAGE AND ACCOUNT TO THE AGENCY THEREFOR.
  (12) NOTWITHSTANDING ANY OTHER PROVISION OF LAW, THE AGENCY IS AUTHOR-
IZED  TO REQUIRE, AS A CONDITION TO THE PURCHASE FROM BANKS OF ANY REHA-
BILITATION MORTGAGE, SUCH RESTRICTIONS UPON ASSUMABILITY  OF  THE  MORT-
GAGE,   DEFAULT  PROVISIONS,  RIGHTS  TO  ACCELERATE,  AND  OTHER  TERMS
APPLICABLE TO SUCH REHABILITATION MORTGAGES MADE BY THE BANK PURSUANT TO
UNDERTAKINGS WITH THE AGENCY WITH RESPECT TO THE  SALE  THEREOF  AS  THE
AGENCY  MAY  DETERMINE TO BE NECESSARY OR DESIRABLE TO ASSURE THE REPAY-
MENT OF ITS BONDS AND NOTES AND THE EXEMPTION FROM FEDERAL INCOME  TAXES
OF  THE INTEREST PAYABLE ON ITS BONDS AND NOTES. ALL SUCH TERMS SHALL BE
ENFORCEABLE BY THE ORIGINATING BANK, THE AGENCY, AND ANY SUCCESSOR HOLD-
ER OF THE MORTGAGE UNLESS EXPRESSLY WAIVED IN WRITING BY OR ON BEHALF OF
THE AGENCY.
  S 3. This act shall take effect on the one hundred twentieth day after
it shall have become a law, except that any rules and regulations neces-
sary for the timely implementation of this act  on  its  effective  date
shall be promulgated on or before such date.

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