2023 New York Laws › UDG - Urban development guarantee fund of New York 175/68

Chapter 175 of the laws of 1968
Urban development guarantee fund of N.Y.
Section  1.  Short  title. This act shall be known and may be cited as
the "Urban development guarantee fund of New York act".
§ 2. Statement of legislative findings and purposes.  The  legislature
hereby  finds  that  in  certain  urban areas of our state the growth of
small business is impeded by the unavailability of reasonable credit for
buildings, equipment, credit for inventory and working  capital.    This
unavailability  of  reasonable  credit restricts business growth and job
opportunities and causes business failures resulting in unemployment and
underemployment with resulting persistent poverty in such  urban  areas.
The  amelioration  of  these  conditions is a responsibility of both the
public and private sector of our economy. Rehabilitation of the economic
life of blighted  areas  is  necessary  in  order  to  prevent  business
failures, to maintain the income of existing small business enterprises,
to  provide  a  business  climate  conducive  to the growth of new small
business enterprises, and to broaden the tax base of such  urban  areas,
all   to   afford   more  meaningful  and  rewarding  business  and  job
opportunities for the residents of  such  areas,  thereby  reducing  the
hazards  of  unemployment  and  raising  the  job  opportunities  of the
underemployed.
The legislature further finds that in certain urban areas of our state
the construction,  reconstruction,  rehabilitation  and  improvement  of
housing  accommodations  is impeded by the shortage of mortgage funds at
reasonable interest rates and the  lack  of  available  credit  for  the
rehabilitation  of older buildings which lack proper heating or sanitary
facilities or which do not comply  in  full  with  modern  building  and
maintenance  code  standards.  The unaided efforts of private enterprise
have not provided and cannot provide an  adequate  supply  of  safe  and
sanitary  housing  within  the financial reach of many families in urban
areas. The upgrading and improvement of such areas through  programs  of
new  construction,  rehabilitation  and  home  improvement  can  provide
additional tax revenues to the community and assist  in  attracting  and
retaining business and industry.
In  order  to  assist  in  the  rehabilitation of these areas and give
constructive attention to the welfare of the needy  residents  of  these
areas, the legislature finds and declares that the marshalling of public
and  private  capital  to make sufficient credit available at the lowest
feasible interest rates to encourage the expansion of small business, to
provide the incentives for the establishment of sound new small business
enterprises and  to  promote  the  construction  and  rehabilitation  of
housing accommodations in such areas, will create new job opportunities,
effectively  reduce unemployment and strengthen the economic base of the
community as a whole, thereby reducing the burdens of poverty and need.
This result can best be accomplished by a loan  guarantee  program  to
guarantee   loans   to   small   businesses   and   owners   of  housing
accommodations,  including  one  and  two  family  homes  and   multiple
dwellings,  unable  to  obtain  reasonable  credit  through conventional
financial sources. The legislature further finds that  the  adoption  of
such  a loan guarantee program to mitigate the economic and social evils
of unemployment, underemployment and inadequate housing is for a  public
purpose,  and to achieve these ends there should be created a non-profit
corporation to be known as the urban development guarantee fund  of  New
York, having such powers and duties as set forth herein.
§ 3. Definitions. 1. "Small business" shall mean a business located in
an  area  having one or more of the characteristics described in section
two  which  is  unable  to  obtain  adequate  financing  to  maintain  a

stabilized work force or increase job opportunities by virtue of (a) its
location, (b) its net assets or (c) its dollar volume of business.
2.  "Fund" shall mean the urban development guarantee fund of New York
created by section four of this act.
3. "Small  business  project"  shall  mean  construction  of  any  new
building,  purchase  of  an  existing  building,  or  refinancing  of an
existing  building  in  order  to  facilitate  substantial   improvement
thereto, the financing of real property deemed essential for the conduct
of  business,  the  extension  or  provision  of utilities and any other
appurtenant facilities  to  be  used  by  any  small  business,  or  any
necessary  machinery,  equipment  or  stock,  working  capital  or other
capital investment therein, or any combination of the  foregoing,  which
the fund shall determine will tend to provide gainful employment for the
people  of  the  state  and/or  increase the tax base of the economy, or
diversify  and  expand  small  business,  or  any  combination  of   the
foregoing.
4.  "Housing project" shall mean the construction of any new building,
purchase of an existing building or refinancing of an existing  building
and  real  property  deemed  essential  to  such  project,  in  order to
facilitate substantial improvement thereto,  designed  and  intended  to
provide  housing  accommodations  for  persons and families which cannot
afford safe and sanitary housing accommodations provided by the  unaided
efforts  of private enterprise, and such facilities as may be incidental
and appurtenant thereto.
5. "Loan guarantee fund" shall mean the fund created in section six of
this act.
6. "Operation and maintenance fund" shall mean  the  fund  created  in
section seven of this act.
7. "Lending institution" shall mean the original lender under the loan
agreement  of  participants  therein and its successors and assigns, and
may include but is not limited to, an  individual  lender,  corporation,
insurance  company, bank, investment company, executor, trustee or other
fiduciary, pension, profit sharing, and retirement fund.
8. "Payments" shall mean periodic payments called for under the  terms
of   a  loan,  and  may  include,  but  is  not  limited  to,  interest,
installments  of  principal,  taxes  and  assessments,  loan   insurance
premiums and hazard insurance premiums.
9.  "New  York  state  urban  development  corporation" shall mean the
corporation created by the New York state urban development  corporation
act.
§  4. Urban development guarantee fund of New York. 1. There is hereby
created a non-profit corporation which shall  be  known  as  the  "Urban
Development Guarantee Fund of New York." Except as otherwise provided in
this  act, the fund shall have all the powers, privileges and immunities
which are now or may hereafter be conferred on business corporations  by
the business corporation law.
2.  The  business  of  the  fund  shall be managed by, and its powers,
functions and duties shall be exercised through a  board  of  directors,
consisting  of  the  directors  of  the New York state urban development
corporation.
3. The chairman of the fund shall be the  chairman  of  the  New  York
state  urban development corporation. Each director shall be entitled to
reimbursement for his actual and  necessary  expenses  incurred  in  the
performance of his official duties with the fund.
4.  Notwithstanding  any  inconsistent  provisions  of  law,  general,
special or local, no officer or employee of the state or  of  any  civil
division thereof, shall be deemed to have forfeited or shall forfeit his
office  or  employment  by reason of his acceptance of membership on the

fund created by this section; provided, however, a  director  who  holds
such  other  public  office  or  employment  shall receive no additional
compensation or allowance for services rendered pursuant  to  this  act,
but  shall  be  entitled  to  reimbursement for his actual and necessary
expenses incurred in the performance of such services.
5.  The  fund  and  its  corporate  existence  shall  continue   until
terminated  by  law,  which law shall provide for the disposition of the
properties and assets of the fund and the assumption of its liabilities,
if any. In no  event  shall  such  law  take  effect  while  debentures,
guarantees  or  other  obligations  of  the fund are outstanding, unless
adequate provision is made in such law for the liquidation, satisfaction
or securing of such obligations.
6. The powers of the fund shall be exercised by affirmative vote of no
less than five of the directors thereof then in  office.  The  fund  may
delegate  to  one  or more of its directors, or its officers, agents and
employees, such powers and duties as it may deem proper.
7. The fund may appoint one or more advisory committees consisting  of
not  more  than  seven members each to consider and advise the fund upon
all matters submitted to them by the fund and to recommend to  the  fund
such changes in the administration of this act and the operations of the
fund  as the advisory committee may deem desirable.  Members of advisory
committees shall serve without salary for such terms, not to exceed four
years, as the fund may determine. Each member of an  advisory  committee
shall be entitled to reimbursement for his actual and necessary expenses
incurred in the performance of his duties.
§  5.  Powers and limitations. 1. In addition to the powers granted by
the business corporation law and except as otherwise  provided  by  this
act, the fund shall have power to:
(a)  Guarantee  loan  repayments  to  a  lending  institution that has
provided the funding for a small business project or housing project, as
defined herein, not to exceed eighty percentum of  the  amount  of  such
loan,  upon such terms and conditions as the fund may prescribe, and for
such purposes, the fund may enter into such agreement or agreements with
lending institutions or other persons as required.
(b) Accept gifts, grants or loans from, and  enter  into  contract  or
other  transaction  with, any federal or state agency, any municipality,
any private organization or any other source.
(c) Enter into agreements with prospective  lending  institutions  and
borrowers   for   the  purpose  of  planning,  designing,  constructing,
acquiring, altering and financing projects.
(d) When it becomes desirable for the fund to  safeguard  itself  from
losses,  it  may acquire, purchase, manage and operate, hold and dispose
of real and personal property, take assignments of  rentals  and  leases
and   make   and  enter  into  all  contracts,  leases,  agreements  and
arrangements necessary or incidental to the performance of its duties.
(e) In order to further the purposes of this act, or to safeguard  the
loan  guarantee  fund,  purchase, acquire and take assignments of notes,
mortgages, and other forms of security and  evidences  of  indebtedness,
purchase, acquire, attach, seize, accept or take title to any project by
conveyance,  or  when  an insured loan thereon is in default, foreclose,
sell, lease or rent the subject matter provided for by the loan.
(f) Prescribe standards and criteria by which  applications  for  loan
guarantees  for  small  business  projects  and housing projects will be
judged, insofar as such standards and criteria are not inconsistent with
the purposes of this act.
(g) Guarantee to any bonding agency authorized to do business in  this
state  any  bond  necessary to the activity of the small business or for
the undertaking of a small business project  or  housing  project.  Such

guarantee  shall  not  exceed eighty percentum of the face amount of any
loss incurred by the bonding agency.
(h)  Issue  and  sell  its debentures, bearing such interest rates and
having such  maturities  and  other  terms  and  provisions  as  may  be
determined by the fund.
(i)  To do any and all things necessary or convenient to carry out its
purposes and exercise the powers given and granted under  this  act,  or
under any other law, special, general or local.
2.  No part of the net earnings of the fund shall inure to the benefit
of any individual and no employee, director or officer of the fund shall
receive  any  pecuniary  benefit  from  the   fund   except   reasonable
compensation for services actually rendered to the fund.  The fund shall
not carry on propaganda or otherwise attempt to influence legislation.
3.  The  fund  shall  not issue shares nor shall any debentures of the
fund be convertible to shares.
§ 6. Loan guarantee fund. The fund shall establish  a  loan  guarantee
fund.  The loan guarantee fund shall be a non-lapsing, revolving fund to
be used for the purpose of carrying out the provisions of this  act.  To
such  loan  guarantee  fund  shall  be charged payments required by loan
defaults. To such loan guarantee fund shall be credited all receipts  of
the  fund,  other  than  receipts  allocated  for the payment of current
operating expenses, including loan guarantee premiums, gifts, grants  or
loans, proceeds of the sale of debentures by the fund, and proceeds from
the  sale,  disposal, lease or rental of real or personal property which
the fund may receive under the provisions of this  act.  Monies  of  the
loan guarantee fund, not needed to meet current obligations of the fund,
shall  be deposited to the credit of such loan guarantee fund and may be
invested as the directors of the fund shall determine.
§ 7. Operation and maintenance  fund.  The  fund  shall  establish  an
operation  and  maintenance  fund, to which shall be charged any and all
operating expenses of the fund, including but not limited to,  salaries,
wages,  rents,  utility  charges,  office supplies and equipment, and to
which shall be credited all receipts of the fund necessary to meet  such
operating expenses.
§  8.  Guarantee  of  loans.  (a)  The fund is authorized to guarantee
repayments of a loan made by a lending institution  to  provide  funding
for  small  business or housing project as defined herein, not to exceed
eighty per centum of the principal amount of the obligation,  upon  such
terms  and  conditions  as  the  fund  may  prescribe, provided that the
aggregate amount of the unpaid balance of all obligations so  guaranteed
and  outstanding  at  any  one time shall not exceed one million dollars
during the first fiscal year of operations  of  the  fund,  and  in  any
succeeding  fiscal  year,  five  times the average annual balance in the
loan guarantee fund for the preceding fiscal year, and provided further,
however, that the total potential liability of the  fund  to  a  lending
institution  on  behalf of any one borrower shall not exceed one hundred
fifty thousand dollars.
(b) The fund is also authorized to guarantee repayments of loans  made
by  a lending institution to a purchaser of either a condominium unit in
a multiple dwelling organized under the condominium act,  or  shares  of
stock in a cooperative corporation which owns a multiple dwelling, where
such  purchaser  intends  to  reside  in  such  condominium unit or such
cooperatively-owned multiple dwelling.  The  amount  of  such  guarantee
shall  not  exceed the lesser of eighty per centum of the purchase price
of the unit or of the shares of stock allocable to the unit, as the case
may be, or $25,000; and the term  of  the  guarantee  shall  not  exceed
twenty-five  years.  No  loan  shall  be  guaranteed if interest thereon
exceeds the legal rate. The aggregate amount of the  unpaid  balance  of

all  obligations  guaranteed  under this subdivision and subdivision (a)
hereof shall not exceed one million dollars during the first fiscal year
of operation hereunder and in any succeeding fiscal year, five times the
average  annual  balance  in  the  loan guarantee fund for the preceding
fiscal year hereunder.
§ 9. Conditions for guarantee. In order for a loan  to  be  guaranteed
under  the  provisions  of  this  act, the loan to be guaranteed must be
executed by a borrower to whom credit is not reasonably  available,  and
in  the  case  of  a  borrower  undertaking  a  housing project, provide
financing  for  the   acquisition,   construction,   reconstruction   or
rehabilitation  of  housing accommodations for persons or families which
cannot afford safe and sanitary housing accommodations provided  by  the
unaided efforts of private enterprise.
§  10. Loan guarantee premium. The fund is authorized but not required
to  fix  premiums  for  the  guarantee  of  loan  repayments  under  the
provisions  of  this  act, such premiums to be computed as a percentage,
which shall not exceed one percentum per annum on that  portion  of  the
principal obligation guaranteed hereunder as the fund shall determine on
the  basis  of  all  pertinent  available  data.  Such premiums shall be
payable by the borrower in such manner as shall  be  prescribed  by  the
fund.  The  amount  of  premium  is not required to be uniform among the
various loans insured provided, however, that that premium provided  for
hereunder  shall  not be payable more than once on loan guarantees given
under subdivision (b) of section eight of this act.
§ 11. Expenses of the fund. The fund may in its discretion expend such
monies  as  may  be  necessary  for  any  of  its  expenses,   including
administrative, legal, actuarial and other services.
§  12.  Obligations eligible for investment. Obligations guaranteed by
the fund under this act and participations therein are hereby made legal
investments  for  all  insurance  companies,  trust  companies,   banks,
investment  companies,  savings  banks,  building and loan associations,
credit unions, savings and loan associations, executors, administrators,
guardians,  conservators,  trustees  and  other  fiduciaries,   pension,
profit-sharing and retirement funds.
§  13.  Contracts of guarantee; waivers. (a) The fund shall arrange by
contract with the  lending  institution  or  the  borrower  or  both  to
safeguard  the  interest  of  the  fund  in  the event of default by the
borrower, including, at the discretion of the fund, provision for notice
to the fund of  default  by  the  borrower,  for  foreclosure  or  other
realization  upon any security for the loan, for the time and conditions
for payment to the lending institution by the fund of the amount of  any
loss  to  the  lending  institution  guaranteed by the fund, and for the
disposition of the proceeds realized from  any  security  for  the  loan
guaranteed.  When  it  appears  desirable  for  a  temporary period upon
default or threatened default by the borrower, the fund may itself  make
payments  of  installments  of  principal  or  interest  or both, to the
lending institution, and of taxes and insurance, which payments shall be
repaid, under such conditions as the fund may prescribe,  and  the  fund
may also agree to revised terms of financing when such appear prudent.
(b) Upon request of the lending institution, the fund may at any time,
under  such  equitable terms and conditions as it may prescribe, consent
to the release of the borrower from his  liability  under  the  loan  or
consent to the release of parts of any secured property from the lien of
the lending institution.
§ 14. Interest of directors of the fund. No director of the fund shall
participate in any decision on any contract of guarantee in which he has
any interest, direct or indirect, in the lending institution or borrower
as set forth herein.
§  15.  Limitation of liability. Neither the directors nor any officer
or employee of the fund, while acting within the scope of his authority,
shall be subject to any personal liability resulting from the activities
of the fund.
§  16.  Designation  and  service of process on secretary of state and
registered agent.  The  directors  of  the  fund  shall  file  with  the
secretary  of  state  a certificate setting forth the street address and
the city and county in which the principal office of the fund is located
within ten days of the establishment of such office.  The  secretary  of
state  shall  note  such  address  upon  his  records. The provisions of
sections three hundred four, three hundred five and three hundred six of
the business corporation law shall be applicable to the fund.
§ 17. Inconsistent provisions of other laws superseded. Insofar as the
provisions of this act are inconsistent with the provisions of any other
law, general, special or local, the provisions  of  this  act  shall  be
controlling.
§  18.  Construction. This act, being necessary for the welfare of the
State and its  inhabitants,  shall  be  liberally  construed  so  as  to
effectuate its purposes.
§  19.  Separability.  If  any clause, sentence, paragraph, section or
part  of  this  act  shall  be  adjudged  by  any  court  of   competent
jurisdiction  to  be invalid, such judgment shall not affect, impair, or
invalidate the remainder thereof, but shall be confined in its operation
to the clause, sentence, paragraph, section  or  part  thereof  directly
involved  in  the  controversy  in  which  such judgment shall have been
rendered.
§ 20. Operative date of the fund. No loan guarantee shall be  made  by
the  fund  until  there has been credited to the loan guarantee fund the
sum of two hundred thousand dollars.