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A07488 Summary:

BILL NOA07488
 
SAME ASNo Same As
 
SPONSORNovakhov (MS)
 
COSPNSRBrook-Krasny, Norber, Blankenbush, Mikulin, Tague
 
MLTSPNSRBarclay, DeStefano, Manktelow, McDonough
 
Amd §2402, add §2405-g, Pub Auth L
 
Authorizes the state of New York mortgage agency 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.
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A07488 Actions:

BILL NOA07488
 
03/28/2025referred to housing
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A07488 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A7488
 
SPONSOR: Novakhov (MS)
  TITLE OF BILL: An act to amend the public authorities law, in relation to authorizing the state of New York mortgage agency to purchase rehabilitation mort- gages   PURPOSE OR GENERAL IDEA OF BILL: To authorize the State of New York Mortgage Agency to purchase rehabili- tation mortgages from banks within the State.   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 (SONYMA) to purchase rehabilitation mortgages from banks within the State. It further adds a new subdivision (18) to Section 2402 of such law to define "rehabili- tation" as the repair, alteration, or improvements of a housing accommo- dation designed to raise the housing standards therein, and a new subdi- vision (19) to Section 2402 of such law to define "rehabilitation mortgage" as a loan extended by a bank secured by a mortgage on real property improved by a residential structure for the financing and reha- bilitation of such residential structure. The bill also states that the agency shall require rehabilitation mortgages to provide that if the borrower is purchasing residential real property, the estimated cost of the repairs must be a t least 25% of the mortgagor's adjusted basis in the residential real property, including land. The rehabilitation mort- gages must also provide that if the borrower is purchasing residential real property, the purchase price plus the estimated cost of the repairs must fall within current SONYMA regulations pertaining to maximum purchase price. To be eligible for a rehabilitation mortgage; the residential structure must be at least 20 years old on the date of the mortgage application. In addition, any commitment issued by a bank for such rehabilitation mortgages must provide that the bank approves the cost and feasibility of the proposed repairs or rehabilitation to the residential structure and that the bank must monitor ongoing repairs and rehabilitation through periodic inspections. The lender would also have to undertake a final inspection. Furthermore, such mortgages would also have to provide that the borrower occupy 'the residential structure as his or her prin- cipal residence within 60 days of the completion of the repair or reha- bilitation work. The bill further grants SONYMA parallel powers given the agency under the forward commitment loan program. These powers include the ability to purchase rehabilitation mortgages from banks as the agency shall deter- mine and the authority to set the interest rate to be borne by rehabili- tation 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 individual borrower and that such bank submit evidence of the making and, if needed, the servicing of such rehabilitation payment mortgages. The bill further provides that the agency require as a condition of purchase of any rehabilitation mortgage from a bank that the bank repre- sent that: the mortgage was not made in 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 homeowner's 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 rehabilitation 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 rehabilitation mortgages 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.   DIFFERENCE BETWEEN ORIGINAL AND AMENDED VERSION (IF APPLICABLE):   EFFECTS OF PRESENT LAW WHICH THIS BILL WOULD ALTER: This bill adds a new Section 2405-g to the Public Authorities Law and two new subdivisions (18) and (19) to Section 2402 of such law.   JUSTIFICATION: Many communities across the State contain older homes which have   JUSTIFICATION: fallen into disrepair. This housing stock represents a potential source of housing for many new low and moderate income homebuyers. It is often difficult, though, for these people to obtain financing from lending institutions to purchase such properties. This bill would authorize the State of New York Mortgage Agency to provide this type of financing which will not only help encourage increased homeownership opportunities but will also lead to the increased rehabilitation of many older homes throughout the State. Although this program represents a new concept in lending for SONYMA, the agency does have experience with programs designed to provide for the rehabilitation of older structures through its mortgage insurance program.. One should also note that this legislation is modeled after rehabilitation mortgage programs that currently exist in New Jersey and Rhode Island.   PRIOR LEGISLATIVE HISTORY: 2024- A.4678 - A5614 -- Referred to Housing Referred to Housing 2022 2020 - A6165 - Held in Housing 2018 - A3832 - Held in Housing 2016 - A3291 - Held in Housing 2014 - A3317 - Held in Housing 2012 - A2512 - Held in Housing 2010 - A4366 - Held in Housing 2008 - A4027 - Held in Housing 2006 - A9607 - Held in Housing   FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: Minimal to the State.   EFFECTIVE DATE: One hundred twentieth day after the bill becomes a law.
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A07488 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          7488
 
                               2025-2026 Regular Sessions
 
                   IN ASSEMBLY
 
                                     March 28, 2025
                                       ___________
 
        Introduced  by  M.  of  A.  NOVAKHOV, BROOK-KRASNY, NORBER, BLANKENBUSH,
          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:
 
     1    Section 1. Section 2402 of the public authorities law  is  amended  by
     2  adding two new subdivisions 18 and 19 to read as follows:
     3    (18) "Rehabilitation". Repairs, alterations or improvements of a hous-
     4  ing accommodation designed to raise the housing standards therein.
     5    (19)  "Rehabilitation mortgage". A loan extended by a bank, secured by
     6  a mortgage on real property improved by a residential structure for  the
     7  financing  and rehabilitation of such residential structure which other-
     8  wise complies with the conditions  established  by  section  twenty-four
     9  hundred five-g of this part.
    10    §  2.  The  public  authorities law is amended by adding a new section
    11  2405-g to read as follows:
    12    § 2405-g. Purchase of rehabilitation mortgages.  (1) A purpose of  the
    13  agency  shall  be to purchase rehabilitation mortgages from banks within
    14  the state during periods when there is an inadequate  supply  of  credit
    15  available  for  new residential mortgages or available for such loans at
    16  carrying charges within the financial means of persons and  families  of
    17  low and moderate income.
    18    It  is  hereby  found  and declared that such activities by the agency
    19  will alleviate a condition in this state which is contrary to the public
    20  health, safety and general welfare and which has constituted in the past
    21  and from time to time in the future can  be  expected  to  constitute  a
    22  public  emergency.  It  is further found and declared that such purposes
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD04354-01-5

        A. 7488                             2
 
     1  are in all respects for the benefit of the people of the  state  of  New
     2  York and the agency shall be regarded as performing an essential govern-
     3  mental  function  in  carrying  out  its  purposes and in exercising the
     4  powers granted by this title.
     5    (2) (a) The agency shall require that rehabilitation mortgages provide
     6  that  the  estimated  cost  of the repairs shall be at least twenty-five
     7  percent of the mortgagor's adjusted basis in the residential real  prop-
     8  erty (including land).
     9    (b) Such rehabilitation mortgages shall also provide that the purchase
    10  price  plus  the estimated cost of the repairs shall fall within current
    11  agency regulations pertaining to maximum purchase price. To be  eligible
    12  for  such mortgages at least twenty years shall have elapsed between the
    13  date the residential real property was first used and  the  commencement
    14  of  physical  work on such rehabilitation. To be eligible for such mort-
    15  gages, (i) at least fifty percent of the existing external walls of  the
    16  residential structure shall be retained in place as external walls, (ii)
    17  at  least  seventy-five  percent  of  the existing walls are retained in
    18  place as internal or external walls, and  (iii)  at  least  seventy-five
    19  percent  of  the  existing  internal  structural  framework shall remain
    20  intact. Any commitment issued by a bank for  such  rehabilitation  mort-
    21  gages shall provide that the bank shall certify the cost and feasibility
    22  of  the  proposed repairs or rehabilitation to the residential structure
    23  and that the bank  shall  monitor  ongoing  repairs  and  rehabilitation
    24  through  periodic inspections and shall perform a final inspection. Such
    25  mortgages shall also provide that the borrowers shall occupy  the  resi-
    26  dential  structure  as  such borrower's principal residence within sixty
    27  days of the completion of the repair or rehabilitation work.
    28    (3) The agency shall purchase rehabilitation mortgages from  banks  at
    29  such  prices  and  upon such terms and conditions as it shall determine;
    30  provided, however, that the  total  purchase  price,  exclusive  of  any
    31  amounts representing a refund of commitment or other fees paid by a bank
    32  to  the  agency,  for all mortgages which the agency commits to purchase
    33  from a bank at any one time shall in no event be more than the total  of
    34  the unpaid principal balances thereof, plus accrued interest thereon.
    35    (4)  In conducting its program of purchasing rehabilitation mortgages,
    36  the agency shall be governed by  the  provisions  of  paragraph  (b)  of
    37  subdivision three of section twenty-four hundred five of this part.
    38    (5)  The  agency shall require as a condition of purchase of rehabili-
    39  tation mortgages from banks that each such bank certify that  each  such
    40  rehabilitation  mortgage is to an individual borrower and is in addition
    41  to the mortgages such certifying bank otherwise would have made.
    42    (6) Notwithstanding the  maximum  interest  rate,  if  any,  fixed  by
    43  section  5-501  of  the  general  obligations  law  or any other law not
    44  specifically amending or applicable to this section, the agency may  set
    45  the  interest  rate to be borne by rehabilitation mortgages purchased by
    46  the agency from banks at a rate or rates which the agency from  time  to
    47  time  shall determine to be at least sufficient, together with any other
    48  available monies, to provide for the payment of its bonds and notes, and
    49  rehabilitation mortgages bearing such interest rate shall not be  deemed
    50  to  violate  any such law or to be unenforceable if originated by a bank
    51  in good faith pursuant to an undertaking with the agency with respect to
    52  the sale thereof notwithstanding any subsequent failure of the agency to
    53  purchase the mortgage or any subsequent sale or disposition of the mort-
    54  gage by the agency to such bank or any other person.
    55    (7) The agency shall require the submission to it by  each  bank  from
    56  which  the agency has purchased rehabilitation mortgages evidence satis-

        A. 7488                             3
 
     1  factory to the agency of the making, and if applicable,  the  servicing,
     2  of  such  rehabilitation mortgages in conformity with such bank's under-
     3  taking with the agency and in  connection  therewith  may,  through  its
     4  employees  or  agents  or those of the department of financial services,
     5  inspect the books and records of any such bank.
     6    (8) Compliance by any bank with the terms of  its  agreement  with  or
     7  undertaking  to  the agency with respect to the sale and, if applicable,
     8  the servicing of rehabilitation mortgages may be enforced by  decree  of
     9  the  supreme court. The agency may require as a condition of purchase of
    10  rehabilitation mortgages from any bank the consent of such bank  to  the
    11  jurisdiction  of  the supreme court over any such proceeding. The agency
    12  may also require agreement by any bank, as a condition of  the  agency's
    13  purchase  of  rehabilitation mortgages from such bank, to the payment of
    14  penalties to the agency for violation by the bank of its undertakings to
    15  the agency, and such penalties shall be recoverable at the suit  of  the
    16  agency.
    17    (9)  The  agency shall require as a condition of purchase of any reha-
    18  bilitation mortgage from a bank that the bank represent and  warrant  to
    19  the agency that:
    20    (a)  the mortgage was not made in satisfaction of an obligation of the
    21  bank under section twenty-four hundred five of this part;
    22    (b) the unpaid principal balance of the mortgage and the interest rate
    23  thereon have been accurately stated to the agency;
    24    (c) the amount of the unpaid  principal  balance  is  justly  due  and
    25  owing;
    26    (d)  the  bank  has  no  notice  of the existence of any counterclaim,
    27  offset or defense asserted by the mortgagor or any successor  in  inter-
    28  est;
    29    (e) the mortgage is evidenced by a bond or promissory note and a mort-
    30  gage  document  which  has  been  properly recorded with the appropriate
    31  public official;
    32    (f) the mortgage constitutes a valid first lien on the  real  property
    33  described to the agency subject only to real property taxes not yet due,
    34  installments  of assessments not yet due, and easements and restrictions
    35  of record which do not adversely affect, to a material degree,  the  use
    36  or value of the real property or improvements thereon;
    37    (g) the mortgagor is not at such time in default in the payment of any
    38  installment  of principal or interest, escrow funds, real property taxes
    39  or otherwise in the performance of such  mortgagor's  obligations  under
    40  the  mortgage documents and has not to the knowledge of the bank been in
    41  default in the performance of any such obligation for a period of longer
    42  than sixty days during the life of the mortgage; and
    43    (h) the improvements to the mortgaged real property are covered  by  a
    44  valid  and subsisting policy of insurance issued by a company authorized
    45  by the superintendent of financial services to issue  such  policies  in
    46  the state and providing fire and extended coverage to an amount not less
    47  than  eighty  percent  of the insurable value of the improvements to the
    48  mortgaged real property.
    49    (10) Each bank shall be liable to the agency for any damages  suffered
    50  by  the  agency  by  reason  of the untruth of any representation or the
    51  breach of any warranty and, in the event that any  representation  shall
    52  prove  to be untrue when made or in the event of any breach of warranty,
    53  the bank shall, at the option of the agency, repurchase the mortgage for
    54  the original purchase price adjusted for amounts subsequently paid ther-
    55  eon, as the agency shall determine.

        A. 7488                             4
 
     1    (11) The agency need not require the recording of an assignment of any
     2  rehabilitation mortgage purchased by it from a  bank  pursuant  to  this
     3  section  and  shall  not  be  required  to  notify  the mortgagor of its
     4  purchase of the mortgage. The agency shall not be required to inspect or
     5  take  possession  of  the  mortgage documents if the bank from which the
     6  rehabilitation mortgage  is  purchased  by  the  agency  shall  enter  a
     7  contract to service such mortgage and account to the agency therefor.
     8    (12) Notwithstanding any other provision of law, the agency is author-
     9  ized  to require, as a condition to the purchase from banks of any reha-
    10  bilitation mortgage, such restrictions upon assumability  of  the  mort-
    11  gage,   default  provisions,  rights  to  accelerate,  and  other  terms
    12  applicable to such rehabilitation mortgages made by the bank pursuant to
    13  undertakings with the agency with respect to the  sale  thereof  as  the
    14  agency  may  determine to be necessary or desirable to assure the repay-
    15  ment of its bonds and notes and the exemption from federal income  taxes
    16  of  the interest payable on its bonds and notes. All such terms shall be
    17  enforceable by the originating bank, the agency, and any successor hold-
    18  er of the mortgage unless expressly waived in writing by or on behalf of
    19  the agency.
    20    § 3. This act shall take effect on the one hundred twentieth day after
    21  it shall have become a law. Effective immediately, the addition,  amend-
    22  ment and/or repeal of any rule or regulation necessary for the implemen-
    23  tation of this act on its effective date are authorized to be made on or
    24  before such effective date.
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