S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   1789
 
                        2025-2026 Regular Sessions
 
                           I N  A S S E M B L Y
 
                             January 14, 2025
                                ___________
 
 Introduced by M. of A. FITZPATRICK, TAGUE -- Multi-Sponsored by -- M. of
   A.  DeSTEFANO, MANKTELOW -- 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.
   § 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.
                                                            LBD04002-01-5
 A. 1789                             2
              

 
   (2) (A) THE AGENCY SHALL REQUIRE CONSTRUCTION MORTGAGES  PROVIDE  THAT
 THE  ESTIMATED  COST OF THE CONSTRUCTION SHALL BE AT LEAST FIFTY PERCENT
 OF THE MORTGAGOR'S ADJUSTED  BASIS  IN  THE  RESIDENTIAL  REAL  PROPERTY
 (INCLUDING LAND).
   (B)  SUCH  CONSTRUCTION MORTGAGES SHALL ALSO PROVIDE THAT THE PURCHASE
 PRICE OF THE REAL PROPERTY PLUS THE ESTIMATED COST OF  THE  CONSTRUCTION
 SHALL  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
 A. 1789                             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, AT SUCH TIME, IN DEFAULT IN THE  PAYMENT  OF
 ANY  INSTALLMENT  OF  PRINCIPAL OR INTEREST, ESCROW FUNDS, REAL PROPERTY
 TAXES OR OTHERWISE IN THE PERFORMANCE OF  SUCH  MORTGAGOR'S  OBLIGATIONS
 UNDER  THE  MORTGAGE  DOCUMENTS 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
 A. 1789                             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.  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.