Bill Text: NY A06143 | 2019-2020 | General Assembly | Introduced

Bill Title: 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.

Spectrum: Partisan Bill (Republican 4-0)

Status: (Introduced) 2019-02-28 - referred to corporations, authorities and commissions [A06143 Detail]

Download: New_York-2019-A06143-Introduced.html

                STATE OF NEW YORK
                               2019-2020 Regular Sessions
                   IN ASSEMBLY
                                    February 28, 2019
        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-
          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 a new subdivision 18 to read as follows:
     3    (18) "Construction mortgage". A loan extended by a bank secured  by  a
     4  mortgage  on  real  property improved by a residential structure for the
     5  construction of such structure.
     6    § 2. The public authorities law is amended by  adding  a  new  section
     7  2405-g to read as follows:
     8    §  2405-g.  Purchase  of construction mortgages.  (1) A purpose of the
     9  agency shall be to purchase construction mortgages from banks within the
    10  state during periods when there is an inadequate supply of credit avail-
    11  able for new residential mortgages or available for such loans at carry-
    12  ing charges within the financial means of persons and  families  of  low
    13  and moderate income.
    14    It  is  hereby  found  and declared that such activities by the agency
    15  will alleviate a condition in this state which is contrary to the public
    16  health, safety and general welfare and which has constituted in the past
    17  and from time to time in the future can  be  expected  to  constitute  a
    18  public  emergency.  It  is further found and declared that such purposes
    19  are in all respects for the benefit of the people of the  state  of  New
    20  York and the agency shall be regarded as performing an essential govern-
    21  mental  function  in  carrying  out  its  purposes and in exercising the
    22  powers granted by this title.
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.

        A. 6143                             2
     1    (2) (a) The agency shall require construction mortgages  provide  that
     2  the estimated cost of the construction must be at least fifty percent of
     3  the mortgagor's adjusted basis in the residential real property (includ-
     4  ing land).
     5    (b)  Such  construction mortgages shall also provide that the purchase
     6  price of the real property plus the estimated cost of  the  construction
     7  must  fall  within  current  agency  regulations  pertaining  to maximum
     8  purchase price. Any commitment issued by a bank  for  such  construction
     9  mortgage  shall  provide  that  the  bank  shall certify the cost of the
    10  construction of the residential structure and that the bank shall  moni-
    11  tor  ongoing construction through periodic inspections and shall perform
    12  a final inspection.
    13    (3) The agency shall purchase construction  mortgages  from  banks  at
    14  such  prices  and  upon such terms and conditions as it shall determine;
    15  provided, however, that the  total  purchase  price,  exclusive  of  any
    16  amounts representing a refund of commitment or other fees paid by a bank
    17  to  the  agency,  for all mortgages which the agency commits to purchase
    18  from a bank at any one time shall in no event be more than the total  of
    19  the unpaid principal balances thereof, plus accrued interest thereon.
    20    (4)  In  conducting  its program of purchasing construction mortgages,
    21  the agency shall be governed by  the  provisions  of  paragraph  (b)  of
    22  subdivision three of section twenty-four hundred five of this part.
    23    (5)   The   agency  shall  require  as  a  condition  of  purchase  of
    24  construction mortgages from banks that each such bank certify that  each
    25  such  construction mortgage is to an individual borrower and is in addi-
    26  tion to the mortgages such certifying bank otherwise would have made.
    27    (6) Notwithstanding the  maximum  interest  rate,  if  any,  fixed  by
    28  section  5-501  of  the  general  obligations  law  or any other law not
    29  specifically amending or applicable to this section, the agency may  set
    30  the interest rate to be borne by construction mortgages purchased by the
    31  agency  from banks at a rate or rates which the agency from time to time
    32  shall determine to be at  least  sufficient,  together  with  any  other
    33  available monies, to provide for the payment of its bonds and notes, and
    34  construction mortgages bearing such interest rate shall not be deemed to
    35  violate  any  such law or to be unenforceable if originated by a bank in
    36  good faith pursuant to an undertaking with the agency  with  respect  to
    37  the sale thereof notwithstanding any subsequent failure of the agency to
    38  purchase the mortgage or any subsequent sale or disposition of the mort-
    39  gage by the agency to such bank or any other person.
    40    (7)  The  agency  shall require the submission to it by each bank from
    41  which the agency has purchased construction mortgages evidence satisfac-
    42  tory to the agency of the making, and if applicable, the  servicing,  of
    43  such  construction  mortgages in conformity with such bank's undertaking
    44  with the agency and in connection therewith may, through  its  employees
    45  or  agents or those of the department of financial services, inspect the
    46  books and records of any such bank.
    47    (8) Compliance by any bank with the terms of  its  agreement  with  or
    48  undertaking  to  the agency with respect to the sale, and if applicable,
    49  the servicing, of construction mortgages may be enforced  by  decree  of
    50  the  supreme court. The agency may require as a condition of purchase of
    51  construction mortgages from any bank the consent of  such  bank  to  the
    52  jurisdiction  of  the supreme court over any such proceeding. The agency
    53  may also require agreement by any bank, as a condition of  the  agency's
    54  purchase  of  construction  mortgages  from such bank, to the payment of
    55  penalties to the agency for violation by the bank of its undertakings to

        A. 6143                             3
     1  the agency, and such penalties shall be recoverable at the suit  of  the
     2  agency.
     3    (9)  The  agency  shall  require  as  a  condition  of purchase of any
     4  construction mortgage from a bank that the bank represent and warrant to
     5  the agency that:
     6    (a) the mortgage was not made in satisfaction of an obligation of  the
     7  bank under section twenty-four hundred five of this part;
     8    (b) the unpaid principal balance of the mortgage and the interest rate
     9  thereon have been accurately stated to the agency;
    10    (c)  the  amount  of  the  unpaid  principal balance is justly due and
    11  owing;
    12    (d) the bank has no notice  of  the  existence  of  any  counterclaim,
    13  offset  or  defense asserted by the mortgagor or any successor in inter-
    14  est;
    15    (e) the mortgage is evidenced by a bond or promissory note and a mort-
    16  gage document which has been  properly  recorded  with  the  appropriate
    17  public official;
    18    (f)  the  mortgage constitutes a valid first lien on the real property
    19  described to the agency subject only to real property taxes not yet due,
    20  installments of assessments not yet due, and easements and  restrictions
    21  of  record  which do not adversely affect, to a material degree, the use
    22  or value of the real property or improvements thereon;
    23    (g) the mortgagor is not now in default in the payment of any install-
    24  ment of principal or interest, escrow  funds,  real  property  taxes  or
    25  otherwise in the performance of his obligations under the mortgage docu-
    26  ments  and  has  not to the knowledge of the bank been in default in the
    27  performance of any such obligation for a period  of  longer  than  sixty
    28  days during the life of the mortgage; and
    29    (h)  the  improvements to the mortgaged real property are covered by a
    30  valid and subsisting policy of insurance issued by a company  authorized
    31  by  the  superintendent  of financial services to issue such policies in
    32  the state and providing fire and extended coverage to an amount not less
    33  than eighty percent of the insurable value of the  improvements  to  the
    34  mortgaged real property.
    35    (10)  Each bank shall be liable to the agency for any damages suffered
    36  by the agency by reason of the untruth  of  any  representation  or  the
    37  breach  of  any warranty and, in the event that any representation shall
    38  prove to be untrue when made or in the event of any breach of  warranty,
    39  the bank shall, at the option of the agency, repurchase the mortgage for
    40  the original purchase price adjusted for amounts subsequently paid ther-
    41  eon, as the agency shall determine.
    42    (11) The agency need not require the recording of an assignment of any
    43  construction  mortgage  purchased  by  it  from  a bank pursuant to this
    44  section and shall not  be  required  to  notify  the  mortgagor  of  its
    45  purchase of the mortgage. The agency shall not be required to inspect or
    46  take  possession  of  the  mortgage documents if the bank from which the
    47  construction mortgage is purchased by the agency shall enter a  contract
    48  to service such mortgage and account to the agency therefor.
    49    (12) Notwithstanding any other provision of law, the agency is author-
    50  ized  to  require,  as  a  condition  to  the purchase from banks of any
    51  construction mortgage, such restrictions upon assumability of the  mort-
    52  gage, default provisions, rights to accelerate, and other terms applica-
    53  ble  to  such construction mortgages made by the bank pursuant to under-
    54  takings with the agency with respect to the sale thereof as  the  agency
    55  may  determine  to  be necessary or desirable to assure the repayment of
    56  its bonds and notes and the exemption from federal income taxes  of  the

        A. 6143                             4
     1  interest  payable  on  its  bonds  and  notes.  All  such terms shall be
     2  enforceable by the originating bank, the agency, and any successor hold-
     3  er of the mortgage unless expressly waived in writing by or on behalf of
     4  the agency.
     5    § 3. This act shall take effect on the one hundred twentieth day after
     6  it shall have become a law, except that any rules and regulations neces-
     7  sary  for  the  timely  implementation of this act on its effective date
     8  shall be promulgated on or before such effective date.