N.Y. Private Housing Finance Law § 1152: Affordable housing development loans

§ 1152. Affordable housing development loans. 1. (a) Notwithstanding

the provisions of any general, special or local law, one or more private

lenders and the city of New York, acting through the agency, shall have

the power to participate and invest in making loans to sponsors for the

construction of eligible projects. Such loans may be made exclusively

for or may include such amounts as may be required for site acquisition

or the refinancing of eligible projects. Each such participation loan

shall be secured by a bond or note and single participating mortgage or

by separate bonds or notes and mortgages upon the eligible project. Such

bond or note and mortgage or bonds or notes or mortgages may contain

such other terms and provisions not inconsistent with the provisions of

this article as the agency may deem necessary or desirable, including,

but not limited to, terms providing that the lien created by such note

and mortgage, and, if applicable, any regulatory agreement executed by

the sponsor and such agency or restrictive covenant approved by such

agency, may be recorded in an equal or subordinate position, or

subsequently made equal or subordinate, to the lien created by any

private lender against such eligible project.

(b) Notwithstanding the provisions of any general, special or local

law, and in addition to the power to make or contract to make

participation loans granted by paragraph (a) of this subdivision, the

city of New York, acting through the agency, shall have the power to

make or contract to make loans or grants to any owner described in

paragraph (a) of this subdivision without the participation of a private

lender, on the same terms as permitted under such paragraph for a

participation loan.

2. The agency may enter into an agreement with a private lender to

deposit its share of a loan with the private lender to be advanced by

the private lender. The portion of the loan funded by the agency may be

equal to or subordinate in lien to the portion of the loan funded by the

private lender and may contain such terms with respect to interest rate,

if any, rate of amortization of principal, if any, and time of payment

of interest and principal as determined by the agency. The agency may

make provision either in the mortgage or mortgages or by separate

agreement for the performance by the private lender of such services as

are generally performed by a banking institution which itself holds a

mortgage, including, without limitation, construction loan advances,

construction supervision, initiation of foreclosure proceedings,

procurement of insurance, and all other matters in connection with the

financing, supervision, regulation and audit of any such loan to any

such eligible project.

3. If the eligible project is to consist of one to four unit dwelling

accommodations or cooperative or condominium units, the agency's share

of the loan may be converted after completion of construction into

mortgages on such dwelling accommodations or condominium units or

financing statements filed with respect to such cooperative shares,

provided such units or such cooperative shares are purchased by persons

of low income. Such mortgages and any blanket mortgage that the agency

retains on any portion of, or on all of, the eligible project may

provide that such mortgages and such blanket mortgage will automatically

be reduced to zero over a period of continuous compliance by the

mortgagor with a regulatory agreement or restrictive covenant with or

approved by the agency and upon the satisfaction of any additional

conditions specified therein. Notwithstanding such provision as

contained in such mortgage, the loan shall be reduced to zero only if,

prior to or simultaneously with delivery of such mortgage, the agency

made a written determination that such reduction would be necessary to

ensure the continued affordability or economic viability of the eligible

project. Such written determination shall document the basis upon which

the loan was determined to be eligible for evaporation. Such period of

continuous compliance with such regulatory agreement or restrictive

covenant shall not be less than fifteen years.

4. If the eligible project is to consist of one to four unit dwelling

accommodations or cooperative or condominium units, the agency shall

require that the dwelling units be offered only to bona fide purchasers

who intend to occupy a unit as their principal place of residence;

provided, however, that in the case of two to four unit dwelling

accommodations the bona fide purchaser may occupy only a single unit as

a principal place of residence. If the purchaser ceases to occupy the

unit as a principal place of residence, the agency may provide for

recapture of all or a portion of the agency's share of the loan.

5. If the eligible project is a rental project, the agency's share of

the loan may be converted after completion of construction into a

permanent loan with a term of forty years, provided that such period may

be extended as the agency may determine is necessary to ensure the

continued affordability or economic viability of the eligible project,

payable in such manner as may be provided in the note and any mortgage

in connection with such loan. Such note and mortgage may contain such

terms and conditions as the agency may deem necessary or desirable to

effectuate the purposes and provisions of this article. The sponsor or

any subsequent owner or owners of such a project shall agree to rent

such units only to persons of low income for such period as the agency

may determine. All such units shall be subject to the emergency tenant

protection act of nineteen seventy-four and the rent stabilization law

of nineteen hundred sixty-nine, as amended, unless converted to a

cooperative or condominium pursuant to subdivision seven of this

section. Initial rentals for all rental units shall be set by the

agency.

6. If the eligible project is a rental project annual profits shall be

limited to an amount set by the agency for as long as the loan is

outstanding. Excess profits shall be used to establish project reserves,

provide capital improvements or reduce the principal amount of the

agency's loan, as determined by the agency.

7. If the eligible project is a rental project, no conversion to a

cooperative or condominium shall be permitted for a period of twenty

years after initial occupancy, and unless (i) the agency's share of the

loan is prepaid upon such conversion, (ii) the conversion shall be done

pursuant to section three hundred fifty-two-eeee of the general business

law as a non-eviction plan, and (iii) apartments occupied by

non-purchasing tenants continue to be subject to the rent stabilization

law of nineteen hundred sixty-nine as amended, until the occurrence of a

vacancy.

8. A loan made pursuant to this article shall be exempt from the

mortgage recording taxes imposed by article eleven of the tax law.

9. Notwithstanding the provisions of any general, special or local law

or charter, the agency shall have power, without soliciting competing

bids, to contract with any sponsor or to make provision in a loan for

the construction or reconstruction of any site improvements located in

the public right-of-way or on the eligible site which are necessary for

the development of an eligible project. Such site improvements may

include, but shall not be limited to, streets, sidewalks, landscaping,

parks and open space, social, recreational, communal and other

non-residential facilities and the outfitting thereof, lighting

fixtures, and water and sewer lines, incidental or appurtenant to the

construction of such eligible projects.

10. No loan shall be made pursuant to the provisions of this article

unless the agency finds that: (a) the construction of the eligible

project does not directly displace current low and moderate income

residents of the eligible site; (b) the eligible project leverages

private and other public investment, if any, so as to reduce the amount

of assistance provided pursuant to this article to the minimal amount

which is necessary for construction of the eligible project; (c) the

eligible project will be built by a private developer/builder who has

agreed to limit its profit in accordance with a formula satisfactory to

the agency; (d) the eligible project will provide assistance to an area

which is blighted or deteriorated or has a blighting influence on the

surrounding area, or is in danger of becoming a slum or a blighted area

because of neighborhood conditions indicating an inability or

unwillingness of the private sector to cause the type of construction

for which a loan is to be provided; and (e) the eligible project will

make home ownership or rental housing affordable to persons who cannot

presently afford the housing available based upon the ordinary unaided

operation of private enterprise.

11. a. The agency may make non-interest bearing advances to sponsors

to defray the pre-development costs of eligible projects in accordance

with the provisions of this chapter.

b. No such advances shall be made unless the agency finds that: (i)

the sponsor proposes to finance the eligible project in whole or in part

by a loan granted pursuant to this article or that the project, if

otherwise financed, will provide housing for persons or families of low

income, and that such project is otherwise consistent with the purposes

of this article; (ii) the project site is suitable, there is a need for

the housing type proposed in the area to be served and the project is

feasible; and (iii) it is reasonable to anticipate that financing will

be obtained and the agency makes a finding to that effect.

c. No such advances may be made to a sponsor unless such sponsor

enters into an agreement with the agency which provides that such

sponsor shall be regulated with respect to rents, profits, dividends and

disposition of its property or franchise, in accordance with the

provisions of this article.

d. An advance granted pursuant to this section shall be used only to

defray the pre-development costs of eligible projects. For purposes of

this subdivision, the term pre-development costs shall include, but

shall not be limited to: the reasonable and necessary costs for

planning, site preparation, developing architectural drawings and

conducting engineering and environmental studies, but shall not include

acquisition of land or buildings, drainage and landscaping of vacant

land, construction of new buildings or the reconstruction or

rehabilitation of existing buildings.

e. Each such advance shall be repaid in full to the agency by the

sponsor. Such repayment shall be made upon receipt by the sponsor or its

successor in interest of the proceeds of its mortgage or construction

loan for the eligible project, unless the agency extends the period for

the repayment of such advances. In no event shall the time of repayment

be extended to a date later than the date of final advance of funds

pursuant to such mortgage or construction loan. Notwithstanding this

paragraph, the agency may reduce such advance to zero over a period of

continued compliance with the agency's agreement with the sponsor

pursuant to paragraph c of this subdivision if the agency has made a

written determination that such reduction would be necessary to ensure

the continued affordability or economic viability of the eligible

project. Such written determination shall document the basis upon which

the agency's non-interest bearing advance was determined eligible for

evaporation.

f. If the agency, in its discretion, determines at any time that

mortgage or construction financing for the eligible project may not be

obtained, then all advances made to the sponsor pursuant to this

subdivision shall become immediately due and payable upon the demand of

the agency.

12. If the eligible project is a rental project, the bond or note and

mortgage or bonds or notes or mortgages issued by the sponsor of any

eligible project to secure a participation loan may provide that the

city's portion of such loan shall be reduced to zero commencing on the

fifteenth year after the execution of such bond or note and mortgage or

bonds or notes or mortgages, provided that, as of the date of any such

reduction, the eligible project has been and continues to be owned and

operated in a manner consistent with a regulatory agreement with the

city. Notwithstanding such provision as contained in the bond or note

and mortgage or bonds or notes or mortgages, the loan shall be reduced

to zero only if, prior to or simultaneously with delivery of such bond

or note and mortgage or bonds or notes or mortgages, the agency made a

written determination that such reduction would be necessary to ensure

the continued affordability or economic viability of the eligible

project. Such written determination shall document the basis upon which

the loan was determined to be eligible for evaporation.