S T A T E   O F   N E W   Y O R K
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                                   4678
 
                        2023-2024 Regular Sessions
 
                           I N  A S S E M B L Y
 
                             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:
 
   Section 1. Section 2402 of the public authorities law  is  amended  by
 adding two new subdivisions 18 and 19 to read as follows:
   (18) "REHABILITATION". REPAIRS, ALTERATIONS OR IMPROVEMENTS OF A HOUS-
 ING ACCOMMODATION DESIGNED TO RAISE THE HOUSING STANDARDS THEREIN.
   (19)  "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-G OF THIS PART.
   §  2.  The  public  authorities law is amended by adding a new section
 2405-g to read as follows:
   § 2405-G. 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.
                                                            LBD08428-01-3
              

 A. 4678                             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,
 A. 4678                             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 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 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 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
 REHABILITATION  MORTGAGE  PURCHASED  BY  IT FROM A BANK PURSUANT TO THIS
 A. 4678                             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.
   § 3. This act shall take effect on the one hundred twentieth day after
 it  shall have become a law. Effective immediately, the addition, amend-
 ment and/or repeal of any rule or regulation necessary for the implemen-
 tation of this act on its effective date are authorized to be made on or
 before such date.