S T A T E   O F   N E W   Y O R K
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                                  4680

                       2009-2010 Regular Sessions

                            I N  S E N A T E

                             April 27, 2009
                               ___________

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 17 and 18 to read as follows:
  (17) "REHABILITATION". REPAIRS, ALTERATIONS OR IMPROVEMENTS OF A HOUS-
ING ACCOMMODATION DESIGNED TO RAISE THE HOUSING STANDARDS THEREIN.
  (18) "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
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.
                                                           LBD02876-01-9
              

S. 4680                             2

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-
FACTORY  TO  THE AGENCY OF THE MAKING, AND IF APPLICABLE, THE SERVICING,

S. 4680                             3

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.
  (11) THE AGENCY NEED NOT REQUIRE THE RECORDING OF AN ASSIGNMENT OF ANY
REHABILITATION MORTGAGE PURCHASED BY IT FROM A  BANK  PURSUANT  TO  THIS

S. 4680                             4

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.