NY State Senate Bill 2019-S900

Archive: Last Bill Status - In Senate Committee Corporations, Authorities And Commissions Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 09, 2019	referred to corporations, authorities and commissions

2019-S900 (ACTIVE) - Details

See Assembly Version of this Bill:: A6143
Current Committee:: Senate Corporations, Authorities And Commissions
Law Section:: Public Authorities Law
Laws Affected:: Amd §2402, add §2405-g, Pub Auth L
Versions Introduced in Other Legislative Sessions:: 2009-2010: S1154, A4284
2011-2012: S867, A2637
2013-2014: S4038, A3200
2015-2016: S2339, A3126
2017-2018: S538, A3839
2021-2022: A5526
2023-2024: A3675

2019-S900 (ACTIVE) - Summary

Authorizes the state of New York mortgage agency to purchase construction 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.

2019-S900 (ACTIVE) - Sponsor Memo

                                
 
BILL NUMBER: S900

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

 
PURPOSE:

To help foster in the state a secondary market for construction lending.

 
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 to purchase construction
mortgages from banks within the state. It further adds a new subdivision
(18) to Section 2402 of such law to define a construction mortgage as a
loan extended by a bank that is secured by a mortgage on real property
improved by a residential structure for the construction of such resi-
dential structure.

The bill also states that the agency shall require mortgages to provide
that the estimated cost of the construction must be at least 50 percent
of the mortgagor's adjusted basis in the residential real property,
including land. The mortgages must also provide that the purchase price
of the real property plus the estimated cost of the construction must
fall within current SONYMA regulations pertaining to maximum purchase
price.

In addition, any commitment issued by a bank for such construction mort-
gages must provide that the bank approve the cost of the proposed
construction of the residential structure and that the bank must monitor
ongoing construction through periodic inspections and a final
inspection.

The bill further grants SONYMA parallel powers given the agency under
the forward commitment loan program. These powers include the ability to
purchase construction mortgages from banks as the agency shall determine
and the authority to set the interest rate to be borne by construction
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 indi-
vidual borrower and that such bank submit evidence of the making and, if
needed, the servicing, of such construction mortgages.

The legislation also provides that the agency require as a condition of
purchase of any construction mortgage from a bank that the bank repre-
sent that: the mortgage was not made m 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 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 construction 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 construction 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.

 
EFFECTS OF PRESENT LAW WHICH THIS BILL WOULD ALTER:

This bill adds a new Section 2405-g to the Public Authorities Law and a
new subdivision (18) to such Section 2402 of such law.

 
JUSTIFICATION:

According to the report of the bipartisan Millennial Housing Commission
issued in May 2002, one of the last major challenges for the nation's
housing finance system is the development of a strong secondary market
for construction loans. Capital for housing construction is generated by
commercial banks and thrift institutions that normally retain the loan
in their portfolios rather than selling them into the secondary mortgage
market. In fact, according to a recent survey by the National Associ-
ation of Home Builders 91t of single family construction loans come from
commercial banks and thrifts. Thus, these loans do not benefit from the
lower rates and liquidity provided by the secondary market. By authoriz-
ing the State of New York Mortgage Agency to purchase construction loans
from banks and thrifts, this bill attempts to foster the creation of a
secondary market in construction loans to help reduce the costs of such
loans for residents of the state who are building their own homes.

 
PRIOR LEGISLATIVE HISTORY:

2017,2018: S.538/A.3839 Referred to Corporations, Authorities and
Commissions
2015,2016: S.2339/A.3126 Referred to Corporations, Authorities and
Commissions
2013,2014: S.4038/A.3200 Referred to Corporations, Authorities and
Commissions
2011,2012: S.867/A.2637 Referred to Corporations, Authorities and
Commissions
2009,2010: S. 1154/A.4284 Referred to Corporations, Authorities and
Commissions
2007,2008: S. 370/A.4314 Referred to Corporations, Authorities and
Commissions
2005,2006: S. 6256/A.9604 Referred to Corporations, Authorities and
Commissions

 
FISCAL IMPLICATIONS:

None to the State.

 
EFFECTIVE DATE:
One hundred twenty days after the bill becomes law.

2019-S900 (ACTIVE) - Bill Text download pdf

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                    900
 
                        2019-2020 Regular Sessions
 
                             I N  S E N A T E
 
                              January 9, 2019
                                ___________
 
 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  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.
   §  2.  The  public  authorities law is amended by adding a new section
 2405-g to read as follows:
   § 2405-G. 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.
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD03637-01-9

 S. 900                              2
 
   (2)  (A)  THE AGENCY SHALL REQUIRE CONSTRUCTION MORTGAGES PROVIDE THAT
 THE ESTIMATED COST OF THE CONSTRUCTION MUST BE AT LEAST FIFTY PERCENT OF
 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 DEPARTMENT OF FINANCIAL SERVICES, 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

 S. 900                              3
 
 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
 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 FINANCIAL SERVICES TO ISSUE SUCH POLICIES IN
 THE STATE 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

 S. 900                              4
 
 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.
   § 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.

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Senate Bill S900

Sponsored By

Archive: Last Bill Status - In Senate Committee Corporations, Authorities And Commissions Committee

2019-S900 (ACTIVE) - Details

2019-S900 (ACTIVE) - Summary

2019-S900 (ACTIVE) - Sponsor Memo

2019-S900 (ACTIVE) - Bill Text download pdf

Comments

Senate Bill S900

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Sponsored By

Catharine Young

Archive: Last Bill Status - In Senate Committee Corporations, Authorities And Commissions Committee

2019-S900 (ACTIVE) - Details

2019-S900 (ACTIVE) - Summary

2019-S900 (ACTIVE) - Sponsor Memo

2019-S900 (ACTIVE) - Bill Text download pdf

Comments