2023 New York Laws › PBA - Public Authorities › Article 8 - Miscellaneous Authorities › Title 17 - State of New York Mortgage Agency Act › Part 1 › 2405-D - Lease-to-Own Program.

* §  2405-d.  Lease-to-own  program.  (1)  The agency is authorized to
participate in lease-to-own programs as described in this  section.  The
purpose of a lease-to-own program is to provide mortgage financing for a
residence  occupied  as  a  primary residence by a prospective mortgagor
pursuant to a lease-to-own contract with the owner of such property. The
lease-to-own contract shall provide for the  eventual  purchase  by  the
resident of the residence and an interim lease of the residence prior to
the  closing  of  the  purchase  thereof.  The party to the lease-to-own
contract who is the seller of the  residence  is  referred  to  in  this
section as the "seller". The prospective purchaser who is a party to the
lease-to-own   contract   is   referred   to  in  this  section  as  the
"tenant-purchaser". A "residence" for the purpose of this section  is  a
single-family  home,  a condominium housing unit or a housing unit owned
by a cooperative housing corporation.
(2) The agency may contract to acquire and may acquire a mortgage loan
or loans made by a bank to a  seller  who  has  entered  a  lease-to-own
contract with an eligible tenant-purchaser for the property which is the
subject of and security for such mortgage loan.
(3) (a) The lease-to-own contract shall contain:
(i)  a  lease  of the residence, or in the case of cooperative housing
units a sublease, for a term not to exceed five years.
(ii) provision for a rental payment not less than the sum  of  (A)  an
amount sufficient to pay the estimated real property taxes and insurance
on  the residence, or in the case of a cooperative unit, the maintenance
charges; (B) the cost of routine maintenance of the residence unless the
lease-to-own contract requires  the  tenant-purchaser  to  perform  such
maintenance  at  his  own  expense;  (C) an amount sufficient to pay the
interest on the mortgage loan held by the agency on the  residence  less
the  estimated  earnings  on the escrow fund provided for in subdivision
four of this section which is allocable to such  mortgage  held  by  the
agency;  (D)  an  amount  to  be  held  in  escrow,  referred  to as the
"tenant-purchaser escrow", which, when accumulated over  the  period  of
the  lease-to-own  contract,  will amount to a sum sufficient to pay the
tenant-purchaser's required down payment under the lease-to-own contract
plus the estimated closing costs of purchase which will be allocable  to
the  tenant-purchaser,  including  the  seller's  closing  costs  at the
initial closing of the mortgage to the seller; and (E) in the case of  a
condominium unit, common charges.
(iii) provisions obligating the tenant-purchaser to buy and the seller
to sell the residence at the end of the lease term.
(iv)  a  provision  under which the seller waives specific performance
with respect to the tenant-purchaser's obligation to purchase.
(v) a  provision  that  default  by  the  tenant-purchaser  under  the
provisions  of  the lease-to-own contract shall result in the forfeiture
to the seller of all amounts in the tenant-purchaser escrow.
(vi) a provision that the tenant-purchaser shall have the option  upon
reasonable  notice  to  the  seller and the agency to elect to close the
purchase of the residence at an earlier date than that specified in  the
lease-to-own contract.
(vii)   a  provision  that  the  rent  shall  be  adjusted  under  the
lease-to-own contract periodically to take account of changes in  taxes,
insurance, escrow earnings and other variables intended to be covered by
the tenant's rental payment.
(viii)  a  provision  governing the consequences of default by each of
the parties.
(b) The provisions of the emergency  housing  rent  control  law,  the
local   emergency   housing   rent   control  act,  the  city  rent  and
rehabilitation law, the emergency  tenant  protection  act  of  nineteen

seventy-four  and  the  New York city rent stabilization law of nineteen
hundred  sixty-nine  shall  not  apply  to  a  residence  subject  to  a
lease-to-own  mortgage,  provided  that the mortgage is purchased by the
agency. Such exemption shall begin at the commencement of the lease term
and shall endure for so long thereafter as the agency holds the mortgage
loan.  The  agency shall not sell the mortgage loan prior to the closing
of the transfer of title to  the  tenant-purchaser  or  default  by  the
tenant-purchaser under the lease-to-own contract.
(c)  The  agency  shall  adopt  procedures to ensure that the payments
contemplated by subparagraph (ii) of paragraph (a) of  this  subdivision
are in fact applied to those purposes.
(4)  (a)  The  mortgage loan documents with respect to a mortgage loan
acquired by the agency pursuant to this section shall provide that there
shall be retained as additional security for the mortgage loan an amount
not less than fifteen percent  of  the  purchase  price  stated  in  the
lease-to-own contract. The amount retained shall be disbursed in cash at
the  mortgage  closing  to  an  escrow  fund  held  by  the owner of the
mortgage. When the agency becomes the owner of the  mortgage  loan,  the
agency  shall  receive  the  escrow  amount  to be held by the agency in
escrow. The escrowed funds may be invested by the agency  in  securities
in which the agency is authorized to invest its own funds. All banks and
trust companies are authorized to give such security for deposits by the
agency of escrowed funds as determined by the agency. The escrow amounts
pertaining  to various lease-to-own mortgage loans may be commingled for
investment purposes, but the agency shall keep books of account  showing
the  amount  to  the  credit  of  each  individual  escrow  account. The
investment earnings on each individual escrow account shall be  credited
to the interest payment on the applicable mortgage loan.
(b)  The  agency  shall  advise  the  seller  at  periodic  convenient
intervals of the amount of such earnings with respect to  each  mortgage
loan.
(5)  With the agency's approval, the lease-to-own contract may provide
that, so long  as  the  seller  is  not  in  default,  in  lieu  of  the
establishment  of a tenant-purchaser escrow account, that the portion of
the tenant-purchaser's rental payments allocable to such an account  may
be  received  by the seller first as reimbursement of the seller's costs
of closing of the initial mortgage to the  seller  and,  second,  to  be
credited to the purchase price of the premises.
(6)  (a)  At  the closing of the transfer of title to the residence to
the tenant-purchaser pursuant to the lease-to-own contract,  the  agency
shall  disburse  the  escrow  amount  to  or  for  the  account  of  the
tenant-purchaser.
(b) At such closing, the agency shall require the tenant-purchaser  to
furnish  private mortgage insurance if such insurance is required in the
case of other mortgage loans under this title. If such insurance is  not
obtainable in the private market at the time of such closing, the agency
is authorized to issue such insurance.
(7)  The  agency  shall  establish  such  requirements  with regard to
lease-to-own contracts, lease-to-own residences, the  qualifications  of
tenant-purchasers,  and  the  agency's participation in any lease-to-own
program, as may be deemed appropriate  by  the  agency  to  achieve  the
objectives of this section. The agency's requirements, including but not
limited  to  income  limits  applicable  to the tenant-purchaser and the
purchase price of the residence, must be satisfied at or before the time
the mortgage loan is purchased, and the tenant-purchaser must be  deemed
qualified by the agency at the time.
(8)  Notwithstanding  any  other  provision  of  law,  the  agency  is
authorized to require, as a condition to the financing of  any  mortgage

with  respect  to  a  lease-purchase  residence,  such restrictions upon
assumability of the mortgage, default provisions, rights to  accelerate,
and  other  terms  as  the  agency  may  determine  to  be  necessary or
desirable.  All such terms 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.
(9)  The  provisions of this section shall expire and be of no further
force and effect on and after July first, nineteen hundred ninety-five.
* NB Expired July 1, 1995