S T A T E   O F   N E W   Y O R K
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                                  2637

                       2011-2012 Regular Sessions

                          I N  A S S E M B L Y

                            January 19, 2011
                               ___________

Introduced  by  M.  of A. FITZPATRICK, McKEVITT, GIGLIO -- read once and
  referred 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 construction 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 a new subdivision 18 to read as follows:
  (18) "CONSTRUCTION MORTGAGE". A LOAN EXTENDED BY A BANK SECURED  BY  A
MORTGAGE  ON  REAL  PROPERTY IMPROVED BY A RESIDENTIAL STRUCTURE FOR THE
CONSTRUCTION OF SUCH STRUCTURE.
  S 2. The public authorities law is amended by  adding  a  new  section
2405-f to read as follows:
  S  2405-F.  PURCHASE  OF CONSTRUCTION MORTGAGES.  (1) A PURPOSE OF THE
AGENCY SHALL BE TO PURCHASE CONSTRUCTION MORTGAGES FROM BANKS WITHIN THE
STATE DURING PERIODS WHEN THERE IS AN INADEQUATE SUPPLY OF CREDIT AVAIL-
ABLE FOR NEW RESIDENTIAL MORTGAGES OR AVAILABLE FOR SUCH LOANS AT CARRY-
ING 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
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 CONSTRUCTION MORTGAGES  PROVIDE  THAT
THE ESTIMATED COST OF THE CONSTRUCTION MUST BE AT LEAST FIFTY PERCENT OF

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD02503-01-1
              

A. 2637                             2

THE MORTGAGOR'S ADJUSTED BASIS IN THE RESIDENTIAL REAL PROPERTY (INCLUD-
ING LAND).
  (B)  SUCH  CONSTRUCTION MORTGAGES SHALL ALSO PROVIDE THAT THE PURCHASE
PRICE OF THE REAL PROPERTY PLUS THE ESTIMATED COST OF  THE  CONSTRUCTION
MUST  FALL  WITHIN  CURRENT  AGENCY  REGULATIONS  PERTAINING  TO MAXIMUM
PURCHASE PRICE. ANY COMMITMENT ISSUED BY A BANK  FOR  SUCH  CONSTRUCTION
MORTGAGE  SHALL  PROVIDE  THAT  THE  BANK  SHALL CERTIFY THE COST OF THE
CONSTRUCTION OF THE RESIDENTIAL STRUCTURE AND THAT THE BANK SHALL  MONI-
TOR  ONGOING CONSTRUCTION THROUGH PERIODIC INSPECTIONS AND SHALL PERFORM
A FINAL INSPECTION.
  (3) THE AGENCY SHALL PURCHASE CONSTRUCTION  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 CONSTRUCTION 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
CONSTRUCTION MORTGAGES FROM BANKS THAT EACH SUCH BANK CERTIFY THAT  EACH
SUCH  CONSTRUCTION MORTGAGE IS TO AN INDIVIDUAL BORROWER AND IS IN ADDI-
TION 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 CONSTRUCTION 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
CONSTRUCTION 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 CONSTRUCTION MORTGAGES EVIDENCE SATISFAC-
TORY TO THE AGENCY OF THE MAKING, AND IF APPLICABLE, THE  SERVICING,  OF
SUCH  CONSTRUCTION  MORTGAGES IN CONFORMITY WITH SUCH BANK'S UNDERTAKING
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 CONSTRUCTION MORTGAGES MAY BE ENFORCED  BY  DECREE  OF
THE  SUPREME COURT. THE AGENCY MAY REQUIRE AS A CONDITION OF PURCHASE OF
CONSTRUCTION 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  CONSTRUCTION  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.

A. 2637                             3

  (9)  THE  AGENCY  SHALL  REQUIRE  AS  A  CONDITION  OF PURCHASE OF ANY
CONSTRUCTION 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
CONSTRUCTION  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
CONSTRUCTION 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
CONSTRUCTION MORTGAGE, SUCH RESTRICTIONS UPON ASSUMABILITY OF THE  MORT-
GAGE, DEFAULT PROVISIONS, RIGHTS TO ACCELERATE, AND OTHER TERMS APPLICA-
BLE  TO  SUCH CONSTRUCTION MORTGAGES MADE BY THE BANK PURSUANT TO UNDER-
TAKINGS WITH THE AGENCY WITH RESPECT TO THE SALE THEREOF AS  THE  AGENCY
MAY  DETERMINE  TO  BE NECESSARY OR DESIRABLE 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.  ALL  SUCH TERMS SHALL BE
ENFORCEABLE BY THE ORIGINATING BANK, THE AGENCY, AND ANY SUCCESSOR HOLD-

A. 2637                             4

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 effective date.