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.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A4678
SPONSOR: Fitzpatrick (MS) PURPOSE OR GENERAL IDEA OF BILL:
To authorize the State of New York Mortgage Agency to purchase rehabili-
tation mortgages from banks within the State.
SUMMARY OF PROVISIONS:
This bill adds a new Section 2405-g to the Public Authorities Law to
authorize the State of New York Mortgage Agency (SONYMA) to purchase
rehabilitation mortgages from banks within the State. It further adds a
new subdivision (18) to Section 2402 of such law to define "rehabili-
tation" as the repair, alteration, or improvements of a housing accommo-
dation designed to raise the housing standards therein, and a new subdi-
vision (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 reha-
bilitation of such residential structure. 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 a t least 25% of the mortgagor's adjusted basis in
the residential real property, including land. The rehabilitation mort-
gages 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 approves 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 princi-
pal residence within 60 days of the completion of the repair or rehabil-
itation 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 deter-
mine and the authority to set the interest rate to be borne by rehabili-
tation 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 repre-
sent 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 mortgage is evidenced by
a bond or promissory note and a mortgage document which has been proper-
ly 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 assuma-
bility of the mortgage, default provisions, rights to accelerate, and
other terms applicable to rehabilitation mortgages 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.
DIFFERENCE BETWEEN ORIGINAL AND AMENDED VERSION (IF APPLICABLE):
EFFECTS OF PRESENT LAW WHICH THIS BILL WOULD ALTER:
This bill adds a new Section 2405-g to the Public Authorities Law and
two new subdivisions (18) and (19) to Section 2402 of such law.
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.
PRIOR LEGISLATIVE HISTORY:
2022 - A5614 - Referred to Housing
2020 - A6165 - Held in Housing
2018 - A3832 - Held in Housing
2016 - A3291 - Held in Housing
2014 - A3317 - Held in Housing
2012 - A2512 - Held in Housing
2010 - A4366 - Held in Housing
2008 - A4027 - Held in Housing
2006 - A9607 - Held in Housing
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
Minimal to the State.
EFFECTIVE DATE:
One hundred twentieth day after the bill becomes a law.
STATE OF NEW YORK
________________________________________________________________________
4678
2023-2024 Regular Sessions
IN ASSEMBLY
February 22, 2023
___________
Introduced by M. of A. FITZPATRICK, BLANKENBUSH, J. M. GIGLIO, MIKULIN,
TAGUE -- Multi-Sponsored by -- M. of A. BARCLAY, DeSTEFANO, MANKTELOW,
McDONOUGH -- read once and referred to the Committee on Housing
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:
1 Section 1. Section 2402 of the public authorities law is amended by
2 adding two new subdivisions 18 and 19 to read as follows:
3 (18) "Rehabilitation". Repairs, alterations or improvements of a hous-
4 ing accommodation designed to raise the housing standards therein.
5 (19) "Rehabilitation mortgage". A loan extended by a bank, secured by
6 a mortgage on real property improved by a residential structure for the
7 financing and rehabilitation of such residential structure which other-
8 wise complies with the conditions established by section twenty-four
9 hundred five-g of this part.
10 § 2. The public authorities law is amended by adding a new section
11 2405-g to read as follows:
12 § 2405-g. Purchase of rehabilitation mortgages. (1) A purpose of the
13 agency shall be to purchase rehabilitation mortgages from banks within
14 the state during periods when there is an inadequate supply of credit
15 available for new residential mortgages or available for such loans at
16 carrying charges within the financial means of persons and families of
17 low and moderate income.
18 It is hereby found and declared that such activities by the agency
19 will alleviate a condition in this state which is contrary to the public
20 health, safety and general welfare and which has constituted in the past
21 and from time to time in the future can be expected to constitute a
22 public emergency. It is further found and declared that such purposes
23 are in all respects for the benefit of the people of the state of New
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD08428-01-3
A. 4678 2
1 York and the agency shall be regarded as performing an essential govern-
2 mental function in carrying out its purposes and in exercising the
3 powers granted by this title.
4 (2) (a) The agency shall require that rehabilitation mortgages provide
5 that the estimated cost of the repairs must be at least twenty-five
6 percent of the mortgagor's adjusted basis in the residential real prop-
7 erty (including land).
8 (b) Such rehabilitation mortgages shall also provide that the purchase
9 price plus the estimated cost of the repairs must fall within current
10 agency regulations pertaining to maximum purchase price. To be eligible
11 for such mortgages at least twenty years must have elapsed between the
12 date the residential real property was first used and the commencement
13 of physical work on such rehabilitation. To be eligible for such mort-
14 gages, (i) at least fifty percent of the existing external walls of the
15 residential structure must be retained in place as external walls, (ii)
16 at least seventy-five percent of the existing walls are retained in
17 place as internal or external walls, and (iii) at least seventy-five
18 percent of the existing internal structural framework must remain
19 intact. Any commitment issued by a bank for such rehabilitation mort-
20 gages shall provide that the bank shall certify the cost and feasibility
21 of the proposed repairs or rehabilitation to the residential structure
22 and that the bank shall monitor ongoing repairs and rehabilitation
23 through periodic inspections and shall perform a final inspection. Such
24 mortgages shall also provide that the borrower must occupy the residen-
25 tial structure as his or her principal residence within sixty days of
26 the completion of the repair or rehabilitation work.
27 (3) The agency shall purchase rehabilitation mortgages from banks at
28 such prices and upon such terms and conditions as it shall determine;
29 provided, however, that the total purchase price, exclusive of any
30 amounts representing a refund of commitment or other fees paid by a bank
31 to the agency, for all mortgages which the agency commits to purchase
32 from a bank at any one time shall in no event be more than the total of
33 the unpaid principal balances thereof, plus accrued interest thereon.
34 (4) In conducting its program of purchasing rehabilitation mortgages,
35 the agency shall be governed by the provisions of paragraph (b) of
36 subdivision three of section twenty-four hundred five of this part.
37 (5) The agency shall require as a condition of purchase of rehabili-
38 tation mortgages from banks that each such bank certify that each such
39 rehabilitation mortgage is to an individual borrower and is in addition
40 to the mortgages such certifying bank otherwise would have made.
41 (6) Notwithstanding the maximum interest rate, if any, fixed by
42 section 5-501 of the general obligations law or any other law not
43 specifically amending or applicable to this section, the agency may set
44 the interest rate to be borne by rehabilitation mortgages purchased by
45 the agency from banks at a rate or rates which the agency from time to
46 time shall determine to be at least sufficient, together with any other
47 available monies, to provide for the payment of its bonds and notes, and
48 rehabilitation mortgages bearing such interest rate shall not be deemed
49 to violate any such law or to be unenforceable if originated by a bank
50 in good faith pursuant to an undertaking with the agency with respect to
51 the sale thereof notwithstanding any subsequent failure of the agency to
52 purchase the mortgage or any subsequent sale or disposition of the mort-
53 gage by the agency to such bank or any other person.
54 (7) The agency shall require the submission to it by each bank from
55 which the agency has purchased rehabilitation mortgages evidence satis-
56 factory to the agency of the making, and if applicable, the servicing,
A. 4678 3
1 of such rehabilitation mortgages in conformity with such bank's under-
2 taking with the agency and in connection therewith may, through its
3 employees or agents or those of the department of financial services,
4 inspect the books and records of any such bank.
5 (8) Compliance by any bank with the terms of its agreement with or
6 undertaking to the agency with respect to the sale and, if applicable,
7 the servicing of rehabilitation mortgages may be enforced by decree of
8 the supreme court. The agency may require as a condition of purchase of
9 rehabilitation mortgages from any bank the consent of such bank to the
10 jurisdiction of the supreme court over any such proceeding. The agency
11 may also require agreement by any bank, as a condition of the agency's
12 purchase of rehabilitation mortgages from such bank, to the payment of
13 penalties to the agency for violation by the bank of its undertakings to
14 the agency, and such penalties shall be recoverable at the suit of the
15 agency.
16 (9) The agency shall require as a condition of purchase of any reha-
17 bilitation mortgage from a bank that the bank represent and warrant to
18 the agency that:
19 (a) the mortgage was not made in satisfaction of an obligation of the
20 bank under section twenty-four hundred five of this part;
21 (b) the unpaid principal balance of the mortgage and the interest rate
22 thereon have been accurately stated to the agency;
23 (c) the amount of the unpaid principal balance is justly due and
24 owing;
25 (d) the bank has no notice of the existence of any counterclaim,
26 offset or defense asserted by the mortgagor or any successor in inter-
27 est;
28 (e) the mortgage is evidenced by a bond or promissory note and a mort-
29 gage document which has been properly recorded with the appropriate
30 public official;
31 (f) the mortgage constitutes a valid first lien on the real property
32 described to the agency subject only to real property taxes not yet due,
33 installments of assessments not yet due, and easements and restrictions
34 of record which do not adversely affect, to a material degree, the use
35 or value of the real property or improvements thereon;
36 (g) the mortgagor is not now in default in the payment of any install-
37 ment of principal or interest, escrow funds, real property taxes or
38 otherwise in the performance of his obligations under the mortgage docu-
39 ments and has not to the knowledge of the bank been in default in the
40 performance of any such obligation for a period of longer than sixty
41 days during the life of the mortgage; and
42 (h) the improvements to the mortgaged real property are covered by a
43 valid and subsisting policy of insurance issued by a company authorized
44 by the superintendent of financial services to issue such policies in
45 the state and providing fire and extended coverage to an amount not less
46 than eighty percent of the insurable value of the improvements to the
47 mortgaged real property.
48 (10) Each bank shall be liable to the agency for any damages suffered
49 by the agency by reason of the untruth of any representation or the
50 breach of any warranty and, in the event that any representation shall
51 prove to be untrue when made or in the event of any breach of warranty,
52 the bank shall, at the option of the agency, repurchase the mortgage for
53 the original purchase price adjusted for amounts subsequently paid ther-
54 eon, as the agency shall determine.
55 (11) The agency need not require the recording of an assignment of any
56 rehabilitation mortgage purchased by it from a bank pursuant to this
A. 4678 4
1 section and shall not be required to notify the mortgagor of its
2 purchase of the mortgage. The agency shall not be required to inspect or
3 take possession of the mortgage documents if the bank from which the
4 rehabilitation mortgage is purchased by the agency shall enter a
5 contract to service such mortgage and account to the agency therefor.
6 (12) Notwithstanding any other provision of law, the agency is author-
7 ized to require, as a condition to the purchase from banks of any reha-
8 bilitation mortgage, such restrictions upon assumability of the mort-
9 gage, default provisions, rights to accelerate, and other terms
10 applicable to such rehabilitation mortgages made by the bank pursuant to
11 undertakings with the agency with respect to the sale thereof as the
12 agency may determine to be necessary or desirable to assure the repay-
13 ment of its bonds and notes and the exemption from federal income taxes
14 of the interest payable on its bonds and notes. All such terms shall be
15 enforceable by the originating bank, the agency, and any successor hold-
16 er of the mortgage unless expressly waived in writing by or on behalf of
17 the agency.
18 § 3. This act shall take effect on the one hundred twentieth day after
19 it shall have become a law. Effective immediately, the addition, amend-
20 ment and/or repeal of any rule or regulation necessary for the implemen-
21 tation of this act on its effective date are authorized to be made on or
22 before such date.
