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This entry was published on 2014-09-22
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SECTION 23-A
Mortgage modifications, evidence of pre-existing indebtedness
Private Housing Finance (PVH) CHAPTER 44-B, ARTICLE 2
§ 23-a. Mortgage modifications, evidence of pre-existing indebtedness.
1. Notwithstanding the provision of any law, general or special, the
supervising agency shall have the power to:

(i) assign or pledge or contract to assign or pledge any mortgage
securing a loan, including any loan to finance the construction of a
project, and any note or bond evidencing indebtedness thereon, made by
the municipality in accordance with the provisions of this article, and
any contract or arrangement, including any subsidy contract or
arrangement, relating to such mortgage, and the receipts to be derived
from any of the foregoing, and may reacquire or accept and contract to
reacquire or accept any such mortgage, note, bond, contract or
arrangement, including any mortgage, note, bond, contract or arrangement
made in substitution thereof, and the receipts to be derived therefrom,
or

(ii) consent to and contract for the modification of any of the terms
of a mortgage, and note or bond secured thereby, made pursuant to
section twenty-three of this chapter for the purpose of obtaining
insurance of such mortgage loan by the federal government in order to
refinance all or any part of the indebtedness evidenced by such mortgage
and note or bond, or

(iii) satisfy such mortgage in order to enable the company to obtain
insurance by the federal government of a mortgage loan made for the
purpose of refinancing all or any part of the indebtedness evidenced by
such mortgage and note or bond.

2. In the event that the existing mortgage loan is satisfied pursuant
to this section, the supervising agency may in consideration of the
issuance of such satisfaction accept a new mortgage and note or bond
insured by the federal government in an amount equal to the maximum
principal amount of a mortgage loan the federal government will insure
or accept the proceeds available to the housing company as a result of
the refinancing.

3. In the event that there is residual indebtedness, the housing
company shall make and the supervising agency shall accept such
instruments evidencing such indebtedness as may be required by the
supervising agency as are consistent with the provisions of subdivision
fifteen of section twelve of this chapter, in such form and upon such
terms as the supervising agency may approve. In the event that there are
residual receipts obligations, the housing company may make and the
supervising agency may accept instruments evidencing such obligations in
accordance with the provisions of subdivision sixteen of section twelve
of this chapter.

4. Notwithstanding any other provisions of this article or any
general, special or local law, where the supervising agency has made the
findings required in subdivision one of section twenty-six or section
twenty-six-a and where a project has been approved pursuant to
subdivision five of section twenty-six of this chapter, the supervising
agency may make or contract to make a mortgage loan or exercise other
related powers pursuant to this section or section twenty-three-b or
subdivision twenty-two-a of section six hundred fifty-four of this
chapter without further findings by the supervising agency or further
approval by the local legislative body.

4-a. Notwithstanding the provisions of this article or any general,
special or local law to the contrary, where an existing mortgage loan is
modified or satisfied pursuant to this section and the supervising
agency has approved a new or modified mortgage or mortgages, including a
mortgage and note or bond insured by the federal government and a
mortgage to secure residual indebtedness, the supervising agency may
sell, assign, or otherwise dispose of, at public or private sale, on
such terms and conditions as shall be deemed appropriate by the
supervising agency subject to the approval of the comptroller or chief
fiscal officer of the municipality wherein such agency is located, such
new or modified mortgage or mortgages and related instruments.

4-b. Notwithstanding the provisions of this article or any general,
special or local law to the contrary, where an existing mortgage loan is
modified or satisfied pursuant to this section, the supervising agency
may pay or incur fees, costs, expenses and other amounts, whether or not
any amounts have been appropriated therefor in order to (1) meet a
municipality's obligations under an agreement with the federal
government on account of mortgage insurance, provided that a
municipality's share of any mortgage insurance claim paid by the federal
government shall not exceed fifty percent of the insurance benefits paid
by the federal government, and further provided that a municipality's
share of such claims under any contract or contracts entered into
between a municipality and the federal government shall not exceed five
percent of the outstanding principal amount of all mortgages of the
municipality at any time insured by the federal government and included
within such contract, (2) make loans for, or establish escrow accounts
for the issuance of mortgage insurance, (3) absorb discounts associated
with any sale, assignment or other disposition of a mortgage note or
bond insured by the federal government, (4) pay fees required by the
federal government as a condition for the issuance of mortgage
insurance, (5) install such life safety devices and satisfy such minimum
property standards, as may be required by the federal government which
devices or standards are in addition to any requirement imposed by the
municipality as mortgagee and to make loans for such purposes, (6) pay
closing and other costs related to obtaining mortgage insurance from the
federal government, (7) permit the municipality to issue obligations
secured by such mortgage or mortgages, (8) meet such other costs as the
federal government may from time to time impose, (9) pay any amounts not
previously advanced under a mortgage or mortgages modified or satisfied
pursuant to this section, and (10) hold an amount not to exceed twenty
million dollars at any one time in a revolving account for a period not
to exceed eighteen months from the time of the first deposit therein, to
pay fees, costs, expenses and other amounts attributable to making and
insuring mortgages pursuant to this section or attributable to issuing
obligations secured by such mortgages. If the municipality sells any
such mortgages insured by the federal government for an amount in excess
of the principal amount thereof at the time of such sale, or if the
municipality issues obligations secured by any such mortgages and the
yield on such mortgages is greater than the yield on such obligations
(the yield on such mortgages and obligations having been calculated in
accordance with section one hundred three of the internal revenue code
of the United States and regulations thereunder), then any such premium
and any such differential may be used by the municipality for any lawful
purpose, provided, however, that an amount equal to the annual sum of
such premium and such differential, to the extent such differential is
not paid to or for the benefit of the holders of such obligations, shall
be credited annually by the municipality, at such times as determined by
the supervising agency, as a payment by all municipally-aided projects
then having residual indebtedness, of the then accrued and unpaid
interest on such residual indebtedness. To the extent that any such
credit otherwise allocable to a project in any year exceeds unpaid
interest on the residual indebtedness of such project in that year, such
excess credit shall be allocated among all other eligible projects
having accrued and unpaid interest on residual indebtedness in that
year. Notwithstanding the provisions of the foregoing sentence of this
subdivision, if an eligible project has made cash payments in any year
for the sum of (i) interest on and principal of a federally insured
mortgage and (ii) interest on and principal of residual indebtedness and
(iii) all other payments on account of such insured mortgage, including
mortgage insurance premium and reserves, at least equal to the sum of
(i) interest and principal which would have been due annually on the
original mortgage loan for the project, at the interest rate in effect
at the time the project is refinanced, and (ii) all other required
annual payments on account of such original mortgage loan, such as
reserve requirements, then any excess credit allocable to such eligible
project shall be credited in the next succeeding year as a payment of
interest on residual indebtedness of such project before any cash
payment is required to be made for such interest. Subject to the
provisions of the preceding sentence of this subdivision, if the total
of such credit in any year available for all eligible projects exceeds
the total of all accrued and unpaid interest in that year on residual
indebtedness of all eligible projects then having residual indebtedness,
an amount equal to such excess credit shall be carried forward and
credited in future years as a payment of accrued and unpaid interest on
residual indebtedness of eligible projects in future years until such
time as no further interest remains unpaid with respect to any residual
indebtedness of eligible projects. The supervising agency shall divide
such credit among eligible projects on the basis of the respective
original principal amounts of the federally insured mortgages on
eligible projects; provided, however, that such credit shall be
allocated to projects which receive federal subsidies only to the extent
that such subsidies are not thereby reduced. When there is a
participation, new loan or investment pursuant to section twenty-three-b
of this article for which the consent of a company is required and which
will be substantially equivalent to a refinancing pursuant to section
twenty-three-a or subdivision twenty-two-a of section six hundred
fifty-four of this article, then for purposes of this subdivision the
interest of the municipality after such participation, new loan or
investment which is secured by a mortgage shall be deemed to be the
equivalent of residual indebtedness and the interest of entities or
organizations other than the municipality in such participation, new
loan or investment shall be deemed to be the equivalent of a federally
insured mortgage.

5. No company shall accept a mortgage loan to be insured by the
federal government made for the purpose of refinancing the existing
mortgage loan of a company which shall exceed the amount which can be
supported by the income derived from the operation of the project at the
rental rate determined by the supervising agency that would be necessary
to meet all necessary payments to be made by the company, of all
expenses including fixed charges, sinking funds, reserves and dividends
on outstanding stock, as authorized by the supervising agency, if the
principal amount of the original mortgage loan of the company were to be
fully repaid over the term of such mortgage loan by constant and equal
payments of principal and interest and if the interest rate on the
company's original mortgage loan was eight and one-half percent per
annum or, where the original mortgage loan provides for the payment of
interest at a maximum rate of less than eight and one-half percent per
annum, such maximum amount.

6. A company shall not accept a mortgage to be insured by the federal
government for the purpose of refinancing an existing mortgage loan of a
municipally-aided project unless the sum of interest and principal
payable in respect of such mortgage to be insured by the federal
government and in respect of any residual indebtedness, over the term of
such mortgage and residual indebtedness, shall be no more than the sum
of interest and principal that would be payable in respect of the
existing mortgage loan, over the term of such existing mortgage loan, at
an interest rate of eight and one-half percent per annum or where the
existing mortgage loan provides for a maximum interest rate of less than
eight and one-half percent, at such maximum interest rate.

7. The terms of any mortgage securing residual indebtedness of a
municipally-aided project shall include a provision to the effect that
so long as the project is subject to a mortgage insured or held by the
federal government (a) interest on and principal of such mortgage
securing residual indebtedness shall be payable only if and to the
extent to which surplus cash, as defined in a regulatory agreement
excecuted by the housing company and the federal government, is
available, and (b) the failure to pay interest and principal on such
mortgage securing residual indebtedness shall not constitute an event of
default unless surplus cash is available and not applied to such
payments of interest and principal.

8. Ten days before an initial application is filed with the federal
government to obtain insurance by the federal government of a mortgage
for the purpose of refinancing all or any part of a mortgage loan for a
municipally-aided project pursuant to section twenty-three-a or
subdivision twenty-two-a of section six hundred fifty-four of this
chapter, the supervising agency shall (a) mail to the president or other
representative of the tenants' association or cooperators' advisory
council, recognized by the supervising agency for such municipally-aided
project, written notice of the proposed refinancing, including a copy of
such initial application, and (b) make a copy of such initial
application available at its offices during business hours, for
inspection and copying by the residents of such municipally-aided
project. Ten days before the closing of a proposed participation, new
loan or investment with respect to a municipally-aided project pursuant
to section twenty-three-b of this article, the supervising agency shall
(a) mail to the president or other representative of the tenants'
association or cooperators' advisory council, recognized by the
supervising agency for such municipally-aided project, written notice of
such proposed participation, new loan or investment, including a summary
of the principal terms and conditions thereof, and (b) make a copy of
such summary available at its offices during business hours, for
inspection and copying by the residents of such municipally-aided
project. The unintentional failure of the supervising agency to comply
with the foregoing provisions of this subdivision shall not invalidate
or otherwise affect any such refinancing of a mortgage loan or any such
participation, new loan or investment.