NY Pub Auth L § 2405 (2021)
2021 New York Laws PBA - Public Authorities Article 8 - Miscellaneous Authorities Title 17 - State of New York Mortgage Agency Act Part 1 2405 - Purchase of Existing Mortgages.

* §  2405. Purchase of existing mortgages. (1) A purpose of the agency shall be to purchase existing mortgages  from  banks  within  the  state during  periods  when  there is an inadequate supply of credit available for new residential mortgages and to require such  banks  to  invest  an amount  equal  to  the  proceeds  thereof  as rapidly as possible in new mortgages on residential real  property  for  family  units  within  the state.   It  is  hereby  found  and declared that such activities by the agency will alleviate a condition of affairs 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  governmental  function  in  carrying  out its purposes and in exercising the powers granted by this title.  (2) The agency shall purchase existing mortgages from  banks  at  such prices  and  upon  such  terms  and  conditions  as  it shall determine; provided, however, that  the  total  purchase  price  for  all  existing 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.  (3)  (a)  The  agency  shall  require  as  a  condition of purchase of existing mortgages from banks that such banks shall, within such  period as may be approved by the agency not in excess of ninety days of receipt of the purchase price, enter into written commitments to loan and shall, within  such  period  as  may  be approved by the agency, loan an amount equal to the entire purchase price of such  existing  mortgages  on  new mortgages  within  the  state  having  such  terms  as  the  agency  may prescribe.  (b) (i) The proportionate  dollar  amount  of  commitments  from  each agency  issue of bonds or notes used to purchase mortgages from banks in each region of the state, as such regions are set forth  in  subdivision nine  of  section  twenty-four  hundred  twenty-six of this title shall, subject to subparagraph (ii) hereof, reflect  the  proportion  that  the number of families in each region bears to the number of families in the state as a whole.  (ii)  To  the extent that the reasonable demand by banks in any region is insufficient to accommodate the proportion  of  an  agency  issue  of bonds  or  notes determined pursuant to subparagraph (i) hereof for such region, the agency shall use reasonable efforts  to  purchase  mortgages such  that  the  excess funds from such region are distributed among the other regions in  proportion  to  the  relative  reasonable  demand.  In determining  reasonable  demand,  the agency shall consider, among other things, historical demand for mortgages  in  such  regions,  the  dollar amount  of  offers  by  banks  to  sell  mortgages to the agency and the reasonableness of such offers, considering the size,  mortgage  history, total  assets, liquidity and financial ability of the bank to conform to the contract of sale and the bank's record  of  compliance  with  agency requirements.  (iii)  The  agency shall use its best efforts to the end that not less than one-sixth in dollar amount of  new  mortgages  resulting  from  its program   of   purchasing   mortgages  shall  be  on  newly  constructed residences. A newly constructed residence is defined as a  one  to  four family dwelling not previously occupied.  (iv)  During  the  time  that  the  agency is accepting offers to sell mortgages from banks, the  agency  shall  advertise,  in  newspapers  of general  circulation  within  the  state,  the fact that it is accepting  offers from banks, and such other information as the  agency  determines to be helpful in generating maximum participation by banks and potential mortgagors.  All  banks  within each such region shall be invited by the agency  to  participate  in  the agency's purchase of mortgages from the proceeds of the sale of each issue by the agency of its bonds and notes. The allocation of the proceeds of each such agency issue among the banks requesting  participation  within  each  region  shall,  to  the  extent practicable,  maximize  the  number  of  banks  which  participate.  Any commitment between the agency and a bank shall  require  that  the  bank provide  the agency with such information, as may be deemed necessary by the agency, for the agency to assure that the requirements of this title or any other requirements imposed by the  agency  with  respect  to  the purchase  of mortgages with the proceeds of any agency issue of bonds or notes has been fulfilled.  (c) No commitment to loan or loan on  a  mortgage  secured  or  to  be secured  by  a  multiple  dwelling  shall  satisfy  the  requirement  of paragraph (a) of this subdivision unless the prior written  approval  of such commitment shall have been obtained from the agency. The agency may refuse  to  approve  any  commitment to lend on such a multiple dwelling mortgage if so required by the terms of any bonding resolution and shall not approve any commitment to lend on such a multiple dwelling  mortgage if  the  approval thereof would increase the total dollar amount of such commitments on multiple dwelling mortgages approved by the agency to  an amount  in  excess  of  forty percent of the total purchase price of all mortgages theretofor purchased by the agency pursuant to this section.  (4) In the case of individual borrowers, new mortgages made  by  banks that  sell existing mortgages to the agency shall bear interest computed in accordance with section 5-501 of the general obligations law (whether or not insured or guaranteed by the United  States  of  America  or  any agency  thereof)  at  a  rate which does not exceed the maximum interest rate, if any, set by the agency for such mortgages. The agency  may  set such  a maximum interest rate chargeable to individual borrowers on such new mortgages, 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, at  the  rate  that the  existing mortgages purchased by the agency were discounted to yield plus an interest differential, not in excess of one percent  per  annum, which  the  agency  from  time  to  time  shall determine to be adequate consideration to induce such banks to sell  existing  mortgages  to  the agency  and  to loan an amount equal to the proceeds on new mortgages in furtherance of the purposes of and subject to  the  conditions  of  this title. In the case of corporate borrowers, such new mortgages shall bear interest  at  a  rate  not substantially lower than the rate of interest that banks are charging at the time  of  commitment  on  comparable  new mortgages.  Each  such  bank that sells existing mortgages to the agency shall annually account and pay over to the agency or  to  the  New  York state  housing finance agency for deposit in and for the purposes of the low rent lease account as  set  forth  in  paragraphs  (a)  and  (b)  of subdivision  four of section forty-four-a of the private housing finance law or any successor entity as the agency may direct,  or  to  both  the agency  and  the  New York state housing finance agency for such deposit and purposes in such proportions as the agency  may  direct,  an  amount equal  to the difference between (a) the total amount of interest (which shall include all charges to individual  and  corporate  borrowers  that would  be  treated  as  interest  under  section  5-501  of  the general obligations law and any regulations of the superintendent  of  financial services  pursuant to section fourteen-a of the banking law) received by it during the preceding year on all such new mortgages and (b) the total  amount of interest which such new mortgages would have  yielded  if  the interest  thereon  had been at the maximum rate chargeable to individual borrowers  on  such  new   mortgages   plus   an   additional   interest differential,  not in excess of one percent per annum, determined by the agency to be adequate consideration to  induce  participating  banks  to make new loans on multiple dwellings.  (5)  The  agency  shall require the submission to it by each bank from which the agency has purchased existing mortgages evidence  satisfactory to  the agency of the making of new mortgage loans and of paying over to the low rent lease account as required by this section 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.  (6) Compliance by any bank with the terms of  its  agreement  with  or undertaking  to  the  agency  with  respect  to  the  making  of any new mortgages in connection with the  sale  of  existing  mortgages  and  of paying  over  to the low rent lease account may be enforced by decree of the supreme court. The agency may require as a condition of purchase  of existing  mortgages from any national banking association the consent of such association 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 existing 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.  (7) The agency shall  require  as  a  condition  of  purchase  of  any existing mortgage from a bank that the bank represent and warrant to the agency that  (a) the unpaid principal balance of the mortgage and the interest rate thereon have been accurately stated to the agency;  (b)  the  amount  of  the  unpaid  principal balance is justly due and owing;  (c) the bank has no notice  of  the  existence  of  any  counterclaim, offset  or  defense  asserted  by  the  mortgagor  or  any  successor in interest;  (d) the mortgage is evidenced by a  bond  or  promissory  note  and  a mortgage  document which has been properly recorded with the appropriate public official;  (e) the mortgage constitutes a valid first lien or second lien on  the real  property  described  to  the agency in accordance with subdivision five of section twenty-four hundred two of this  part  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;  (f) the mortgage when made was lawful under the banking law or federal law, whichever governs the affairs of the bank, and would be  lawful  on the  date  of purchase by the agency if made by the bank on that date in the amount of the then unpaid principal balance;  (g) the mortgagor is  not  now  in  default  in  the  payment  of  any installment  of principal or interest, escrow funds, real property taxes or otherwise in the performance of his 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  of  New  York 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.  (8)  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 existing mortgage  for  the  original  purchase  price   adjusted   for   amounts subsequently paid thereon, as the agency may determine.  (9)  The agency need not require the recording of an assignment of any existing 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 existing mortgage is purchased by the agency  shall  enter  a  contract  to  service  such mortgage and account to the agency therefor.  (10)  Notwithstanding  any  other  provision  of  law,  the  agency is authorized to require, as a condition to  the  purchase  from  banks  of existing  mortgages,  such  restrictions  upon  assumability of each new mortgage as the agency may determine to be  necessary  or  desirable  to assure  the  exemption from federal income taxes of the interest payable on its bonds and notes. Such restrictions shall be  enforceable  by  the originating  bank,  the agency, and any successor holder of the mortgage unless expressly waived in writing by or on behalf of the agency.  (11) The agency shall maintain a continuous review of the availability of funds in regular banking channels for  mortgages.  Except  as  stated herein  with  respect to forward commitment mortgages and housing loans, in the event that the agency shall determine that an adequate supply  of funds  exists in regular banking channels for mortgages the agency shall not authorize the issuance of bonds for the purchase of mortgages except refunding bonds, until such time as the agency shall determine that  the supply  of funds available for mortgages is again inadequate. The agency shall notify the governor, the temporary president of  the  senate,  and the  speaker  of  the  assembly  of  any  determination that there is an inadequate supply of funds available for mortgages made by it under this subdivision. Discontinuance by the agency of the purchase  of  mortgages pursuant  to  a determination that an adequate supply of funds exists in regular banking channels shall not constitute, or  in  any  way  effect, termination  of the agency as provided in subdivision six of section two thousand  four  hundred  three  of  this  title.   Notwithstanding   the foregoing,  the  agency  may  issue  bonds  or  notes for the purpose of furthering forward commitment mortgage  programs  described  in  section twenty-four  hundred  five-b  of  this  title  and housing loan programs described in section twenty-four hundred five-c of  this  title  if  the agency  shall  determine  that such programs will increase the supply of credit available for  new  residential  mortgages  and  new  residential improvement  loans  at  carrying  charges  within the financial means of persons and families of low or moderate income.   * NB Effective until July 23, 2023   * § 2405. Purchase of mortgages. (1) The purpose of the  agency  shall be to purchase mortgages from banks within the state during periods when there  is  an  inadequate supply of credit available for new residential mortgage loans and to require such banks to invest an  amount  equal  to the  proceeds  thereof  as  rapidly  as  possible  in  new  mortgages on residential real property for family units within the state.   It is hereby found and declared that such  activities  by  the  agency will alleviate a condition of affairs 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  governmental  function  in  carrying  out its purposes and in exercising the powers granted by this title.  (2) The agency shall purchase mortgages from banks at such prices  and upon such terms and conditions as it shall determine; provided, however, that the total purchase price 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.  (3) (a) The agency  shall  require  as  a  condition  of  purchase  of mortgages from banks that such banks shall, within such period as may be approved  by  the  agency not in excess of ninety days of receipt of the purchase price, enter into written commitments to loan and shall, within such period as may be approved by the agency, loan an  amount  equal  to the  entire purchase price of such mortgages on new mortgages within the state having such terms as the agency may prescribe.  (b) (i) The proportionate  dollar  amount  of  commitments  from  each agency  issue of bonds or notes used to purchase mortgages from banks in each region of the state, as such regions are set forth  in  subdivision nine  of  section  twenty-four  hundred  twenty-six of this title shall, subject to subparagraph (ii) hereof, reflect  the  proportion  that  the number of families in each region bears to the number of families in the state as a whole.  (ii)  To  the extent that the reasonable demand by banks in any region is insufficient to accommodate the proportion  of  an  agency  issue  of bonds  or  notes determined pursuant to subparagraph (i) hereof for such region, the agency shall use reasonable efforts  to  purchase  mortgages such  that  the  excess funds from such region are distributed among the other regions in  proportion  to  the  relative  reasonable  demand.  In determining  reasonable  demand,  the agency shall consider, among other things, historical demand for mortgages  in  such  regions,  the  dollar amount  of  offers  by  banks  to  sell  mortgages to the agency and the reasonableness of such offers, considering the size,  mortgage  history, total  assets, liquidity and financial ability of the bank to conform to the contract of sale and the bank's record  of  compliance  with  agency requirements.  (iii)  The  agency shall use its best efforts to the end that not less than one-sixth in dollar amount of  new  mortgages  resulting  from  its program   of   purchasing   mortgages  shall  be  on  newly  constructed residences. A newly constructed residence is defined as a  one  to  four family dwelling not previously occupied.  (iv)  During  the  time  that  the  agency is accepting offers to sell mortgages from banks, the  agency  shall  advertise,  in  newspapers  of general  circulation  within  the  state,  the fact that it is accepting offers from banks, and such other information as the  agency  determines to be helpful in generating maximum participation by banks and potential mortgagors.  All  banks  within each such region shall be invited by the agency to participate in the agency's purchase  of  mortgages  from  the proceeds of the sale of each issue by the agency of its bonds and notes. The allocation of the proceeds of each such agency issue among the banks requesting  participation  within  each  region  shall,  to  the  extent practicable,  maximize  the  number  of  banks  which  participate.  Any commitment  between  the  agency  and a bank shall require that the bank provide the agency with such information, as may be deemed necessary  by the agency, for the agency to assure that the requirements of this title  or  any  other  requirements  imposed  by the agency with respect to the purchase of mortgages with the proceeds of any agency issue of bonds  or notes has been fulfilled.  (c)  No  commitment  to  loan  or  loan on a mortgage secured or to be secured  by  a  multiple  dwelling  shall  satisfy  the  requirement  of paragraph  (a)  of this subdivision unless the prior written approval of such commitment shall have been obtained from the agency. The agency may refuse to approve any commitment to lend on  such  a  multiple  dwelling mortgage if so required by the terms of any bonding resolution and shall not  approve any commitment to lend on such a multiple dwelling mortgage if the approval thereof would increase the total dollar amount  of  such commitments  on multiple dwelling mortgages approved by the agency to an amount in excess of forty percent of the total  purchase  price  of  all mortgages theretofor purchased by the agency pursuant to this section.  (4) In the case of individual borrowers, such new mortgages shall bear interest  computed  in  accordance  with  section  5-501  of the general obligations law (whether or not insured  or  guaranteed  by  the  United States of America or any agency thereof) at a rate which does not exceed the maximum interest rate, if any, set by the agency for such mortgages. The  agency  may  set such a maximum interest rate chargeable individual borrowers on such new loans, notwithstanding the maximum  interest  rate fixed  by section 5-501 of the general obligations law, at the rate that the mortgages purchased by the agency were discounted to yield  plus  an interest differential, not in excess of one percent per annum, which the agency from time to time shall determine to be adequate consideration to induce  such  banks to sell existing mortgages to the agency and to loan an amount equal to the proceeds on new mortgages in furtherance  of  the purposes  of and subject to the conditions of this title. In the case of corporate borrowers, such new mortgages shall bear interest  at  a  rate not  substantially  lower  than  the  rate  of  interest  that banks are charging at the time of commitment on  comparable  new  mortgage  loans. Each  such  bank shall annually account and pay over to the agency or to the New York state housing finance agency for deposit  in  and  for  the purposes  of  the  low rent lease account as set forth in paragraphs (a) and (b) of subdivision four  of  section  forty-four-a  of  the  private housing finance law or any successor entity as the agency may direct, or to  both  the  agency  and the New York state housing finance agency for such deposit and purposes in such proportions as the agency may  direct, an  amount  equal  to  the  difference  between  (a) the total amount of interest (which shall include all charges to  individual  and  corporate borrowers  that  would be treated as interest under section 5-501 of the general obligations law and any regulations  of  the  superintendent  of financial  services  pursuant  to section fourteen-a of the banking law) received by it during the preceding year on all such new  mortgages  and (b) the total amount of interest which such mortgages would have yielded if  the  interest  thereon  had  been  at  the  maximum  rate chargeable individual borrowers on such  new  loans  plus  an  additional  interest differential,  not in excess of one percent per annum, determined by the agency to be adequate consideration to  induce  participating  banks  to make new loans on multiple dwellings.  (5)  The  agency  shall require the submission to it by each bank from which the agency has purchased mortgages evidence  satisfactory  to  the agency of the making of new mortgage loans and of paying over to the low rent  lease  account  as  required  by  this  section  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.  (6) Compliance by any bank with the terms of  its  agreement  with  or undertaking  to  the  agency  with respect to the making of any mortgage loans and of paying over to the low rent lease account may  be  enforced by decree of the supreme court. The agency may require as a condition of purchase  of mortgages from any national banking association the consent of such association 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 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.  (7) The agency shall  require  as  a  condition  of  purchase  of  any mortgage  from  a bank that the bank represent and warrant to the agency that  (a) the unpaid principal balance of the mortgage and the interest rate thereon have been accurately stated to the agency;  (b) the amount of the unpaid  principal  balance  is  justly  due  and owing;  (c)  the  bank  has  no  notice  of the existence of any counterclaim, offset or  defense  asserted  by  the  mortgagor  or  his  successor  in interest;  (d)  the  mortgage  is  evidenced  by  a bond or promissory note and a mortgage document which has been properly recorded with the  appropriate public official;  (e)  the mortgage constitutes a valid first lien or second lien on the real property described to the agency  in  accordance  with  subdivision five  of  section  twenty-four  hundred two of this part 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;  (f)  the  mortgage  loan when made was lawful under the banking law or federal law, whichever governs the affairs of the  bank,  and  would  be lawful on the date of purchase by the agency if made by the bank on that date in the amount of the then unpaid principal balance;  (g)  the  mortgagor  is  not  now  in  default  in  the payment of any installment of principal or interest, escrow funds, real property  taxes or  otherwise  in  the performance of his 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 of New York 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.  (8) 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 thereon, as the agency may determine.  (9)  The agency need not require the recording of an assignment of any 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 mortgage is  purchased  by the  agency  shall enter a contract to service such mortgage and account to the agency therefor.  (10) The agency shall maintain a continuous review of the availability of  funds  in  regular  banking  channels for new mortgage loans. In the event that the agency shall determine that an adequate supply  of  funds exists  in  regular  banking  channels for new mortgage loans the agency shall not authorize the issuance of bonds for the purchase of  mortgages except  refunding  bonds,  until such time as the agency shall determine that the supply of funds available for mortgages  is  again  inadequate. The  agency  shall  notify  the governor, the temporary president of the senate, and the speaker of the assembly of any determination that  there is  an  inadequate  supply  of  funds available for mortgages made by it under this subdivision. Discontinuance by the agency of the purchase  of mortgages  pursuant  to a determination that an adequate supply of funds exists in regular banking channels shall not constitute, or in  any  way effect,  termination  of  the  agency  as provided in subdivision six of section two thousand four hundred three of this title.   * NB Effective July 23, 2023