§ 23. Municipal loans and municipally aided projects. 1. A
municipality may make or contract to make loans to a company or to a
public benefit corporation providing housing for staff members,
employees or students of a college, university, hospital or child care
institutions and their immediate families in an amount not to exceed,
except in the case of a non-profit company incorporated pursuant to the
provisions of the not-for-profit corporation law and this article for
the purpose of providing housing for aged or handicapped persons of low
income, and except in the case of a company or public benefit
corporations providing housing for staff members, employees or students
of a college, university, hospital or child care institution and their
immediate families, and except in the case of a municipally-aided
non-profit company or of a municipally-aided mutual company, and except
in the case of a low income non-profit housing company, ninety-five per
centum of the project cost to be secured, except as provided in section
fifteen of this article, by a first mortgage lien and may make temporary
loans or advances to a company in anticipation of a permanent municipal
loan. In the case of a non-profit company incorporated pursuant to the
provisions of the not-for-profit corporation law and this article for
the purpose of providing housing for aged or handicapped persons of low
income and in the case of a company or public benefit corporations
providing housing for staff members, employees or students of a college,
university, hospital or child care institution and their immediate
families, and in the case of a municipally-aided non-profit company or
of a municipally-aided mutual company, and in the case of a low income
non-profit housing company, such loans may not exceed the total project
cost. Notwithstanding the foregoing, such loans to a municipally-aided
mutual company to assist in financing the acquisition of a building by
residents thereof may not exceed ninety-five per centum of the project
cost. Such mortgage, or bonds or notes secured thereby and such contract
may contain such terms and conditions not inconsistent with the
provisions of this article as the local legislative body may deem
necessary or desirable to secure repayment of its loan, the interest
thereon and other charges in connection therewith. In the case of a loan
in an amount greater than ninety-five per centum of the total project
cost the supervising agency may in its discretion require satisfactory
independent guarantees that the loan will be repaid according to the
terms of the company's bond or note and mortgage.

1-a. Notwithstanding any other provision of this article or any other
law, any such loan may be made to a company at such rate of interest, if
any, as the local legislative body may deem necessary or desirable to
carry out the policy and purposes of this article.

2. The supervising agency shall have exclusive power to promulgate
such supplementary rules and regulations with respect to a
municipally-aided project and a company formed to undertake or operate
any such project, as may be necessary to carry out the provisions of
this article. No assignment for collateral or pledge by a municipality
of its mortgage interest in a municipally-aided project to the state or
to any political subdivision thereof shall either affect the power of
the supervising agency granted herein or authorize the commissioner to
exercise any powers not otherwise granted in this article.

3. Prior to the date of approval by the local legislative body of the
contract between a municipality and a company for a municipally aided
project, the total estimated project cost of such project, the estimated
capital requirements of the company formed to undertake or operate such
project, the initial capital structure of such company and a
modification of any of the foregoing items, shall be subject to the
approval of the supervising agency and the commissioner. Any
modification of any of the foregoing items made after such date of
approval of the contract shall be subject solely to the approval of the
supervising agency. If after such date of approval of the contract, any
change is made in such contract which requires the approval of the local
legislative body, such change shall also be subject to the prior
approval of the commissioner.

4. The commissioner shall have the power, prior to the date of
approval by the local legislative body of a contract between a company
and the municipality for a municipally aided project, to approve the
proposed maximum average of the rentals to be charged for the dwellings
in the project, or any modifications thereof. After such date of
approval of the contract, the supervising agency shall have sole power
to increase or reduce the rental rate for the dwellings in the project
in the manner prescribed by section thirty-one of this article for the
variance of the rental rates. However, if a variance in such rental rate
is made necessary because of a change in the project which requires the
approval of the local legislative body, the prior approval by the
commissioner of such variance of the rental rate shall also be obtained.

5. The commissioner and the supervising agency shall each have full
power to investigate into and order a company undertaking or operating a
municipally aided project to furnish such reports and information as
each may require concerning the planning, construction, acquisition,
rehabilitation, management or operation of the project.

6. The commissioner shall have the power to audit the books of a
company undertaking or operating a municipally aided project solely as
to the legality of the expenditures and to disallow any expenditure
which the commissioner shall find has been made in violation of law or
any rule or regulation duly issued pursuant to this article. The
supervising agency shall have the full power to audit the books of any
such company as to the legality, reasonableness or necessity of its
expenditures. Any expenditure disallowed by the commissioner or the
supervising agency on such audits shall not be included in any
construction, management or operating costs in connection with any
application to increase or reduce the rents or carrying charges in a
project.

7. (a) At the direction of the supervising agency, with the consent
and approval of the mayor the municipality shall establish and keep a
separate fund known as the limited-profit mortgage reserve fund for the
purposes of insuring the municipality against any loss resulting from
the making of a mortgage loan, temporary loan or advance to a
municipality-aided project and to protect the municipality in the event
of delinquency in the repayment of such mortgage loan, temporary loan or
advance.

(b) There shall be paid into such fund the portions of fees allocated
to and directed to be deposited in such fund by the supervising agency
with the consent and approval of the mayor as provided for in
subdivision seven of this section. In addition, there shall be credited
to and deposited in such fund any portion of the unexpended balance
remaining in the housing fund as the supervising agency with the consent
and approval of the mayor may determine to be in excess of the amounts
needed to meet expenditures required to be paid from the housing fund.

(c) The monies in the limited-profit mortgage reserve fund shall be
deposited in one or more of the banks or trust companies designated, in
the manner provided by law, as depositories of the funds of such
municipal corporation. The comptroller or the chief fiscal officer may
invest the monies in such fund in obligations specified in paragraph d
of this subdivision. Any interest earned or capital gain realized on the
money so deposited or invested shall accrue to and become part of such
fund. The separate identity of such fund shall be maintained whether its
assets consist of cash or investments or both.

(d) Monies in such fund may be invested (1) in special time deposit
accounts in, or certificates of deposit issued by, a bank or trust
company located and authorized to do business in this state, provided,
however, that such time deposit account or certificate of deposit shall
be payable within such time as the proceeds may be needed to meet
expenditures for which such monies were obtained and provided further
that such time deposit account or certificate of deposit be secured by a
pledge of obligations of the United States of America or obligations of
the state of New York or obligations of any municipal corporation,
school district or district corporation of the state of New York; or (2)
in obligations of the United States of America, obligations of the state
of New York or obligations of the municipal corporation which has
established such mortgage insurance fund provided: (i) such obligations
are not tax exempt; (ii) such obligations shall be payable or redeemable
at the option of the owner within such times as the proceeds may be
needed to meet expenditures for purposes for which the monies so
invested were obtained, and (iii) such obligations, unless registered or
inscribed in the name of the municipal corporation for which such
investment is made, shall be purchased through, delivered to and held in
custody of a bank or trust company in this state and shall be sold or
presented for redemption or payment only by such bank or trust company
upon written instructions from the comptroller or chief fiscal officer.

(e) An expenditure shall be made from such fund only by an
authorization of the supervising agency with the consent and approval of
the mayor and only for one or more of the following purposes:

(i) Payment of expenses of establishing and administering the fund;

(ii) Payment of a delinquent installment or installments of interest
and principal due to the municipality under a mortgage loan, temporary
loan or advance to a municipally-aided project;

(iii) Payment of any loss sustained by the municipality as a result of
the making of a loan, temporary loan or advance to a municipally-aided
project, whether such loss consists of a deficiency upon a mortgage,
foreclosure sale as authorized by sections thirty-four and ninety-four
of this chapter or otherwise; except that in the event the municipality
acquires title to the project, payment for any loss or deficiency shall
be deferred until such time when the municipality shall dispose of title
to the project; any such loss or deficiency shall be diminished by the
municipality to the extent of the amount derived by the municipality
from such disposition plus any net operating income derived by the
municipality during its period of ownership or less any net operating
loss sustained by the municipality during such period and less any
amount of interest paid by the municipality to retire any bonded
indebtedness incurred in connection with the loan made to such project.

(iv) Payment of all costs entailed in procuring mortgage insurance in
such amounts, and from such insurers as the supervising agency deems
desirable to insure the municipality against any loss resulting from the
making of a mortgage loan to a municipality-aided project.

The payment from such fund of any delinquent installment or
installments due the municipality under a mortgage as provided in
subsection (ii) of this paragraph e shall not be deemed either a
remission or waiver of the right to such installment or installments and
such installment or installments shall continue to be due and payable to
the municipality and shall be deposited, together with interest accrued,
in the mortgage insurance fund when paid.

(f) The comptroller or chief fiscal officer shall keep a separate
account for the mortgage insurance fund. Such account shall show:

(i) The date and amount of each sum paid into the fund;

(ii) The interest earned by the fund;

(iii) The capital gains or losses resulting from the sale of
investments of the fund;

(iv) The interest or capital gains which have accrued to the fund;

(v) The amount and date of each withdrawal from the fund;

(vi) The assets of the fund indicating the cash balance therein and a
schedule of the amounts invested.

The comptroller or chief fiscal officer shall render a detailed report
of the operation and condition of such fund to the supervising agency
annually each fiscal year and at such other times as the supervising
agency or the mayor may require.

8. Whenever reference is made in this article to a municipal loan, a
loan by a municipality, a loan from a municipality, a contract for a
loan between a municipality and a company, or any similar term, with
respect to the territorial limits of the city of New York such term
shall be construed to refer to a loan made or to be made either by such
municipality or by the New York city housing development corporation,
whichever is applicable.

9. The city of New York shall have the power to invest jointly or
participate in a loan with the New York city housing development
corporation or with one or more organizations or entities mentioned in
section fifteen in a bond or note and single participating mortgage, or
in separate bonds or notes and separate mortgages of a company organized
pursuant to the provisions of this article upon such terms and
conditions as are provided in said section fifteen of this article.

10. A municipality with a population of less than one million may, by
action of its local legislative body concurred in by the commissioner,
provide for the supervision and regulation of any municipally-aided
project and the company carrying out such project by the commissioner in
lieu of the supervising agency. With respect to any such project and
company, the commissioner shall have, from and after the effective date
of such action, all of the powers and duties of a supervising agency
pursuant to this article. The company shall pay to the commissioner
fees, as prescribed by the commissioner, to cover the expenses of
examination, audit, and supervision of the company and the project.
Notwithstanding any other provision of law, funds collected pursuant to
such fees shall be deposited to the credit of the general fund.

The provisions of subdivisions one and eight of this section shall
apply only to projects financed in whole or in part by a mortgage loan,
temporary loan or advance by a municipality. The provisions of
subdivisions two, three, four, five, six and seven hereof shall apply to
all municipally-aided projects including projects financed in whole or
in part by a mortgage loan from the federal government or any agency or
instrumentality thereof or by a mortgage or mortgage bonds insured by
the federal government or any agency or instrumentality thereof.