N.Y. Private Housing Finance Law § 304: Purposes, powers and operation

§ 304. Purposes, powers and operation. 1. The purpose of the

corporation shall be to assist, promote, encourage and stimulate the

development and rehabilitation of blighted areas by rendering financial

assistance in the construction, rehabilitation or purchase of housing

accommodations in blighted or deteriorating urban areas in this state by

making first mortgage loans in areas designated by the corporation, such

loans to be made on a sound economic basis by the application of sound

mortgage lending principles.

2. It is not the intention or the purpose of the powers herein granted

to take from banking or insurance organizations any such loans or

commitments as may be desired by such organizations generally in the

ordinary course of their business; provided however, that the

corporation need not make any specific inquiry or find as a fact that

any banking or insurance organization desires to make any such loan.

3. In furtherance of the purpose set forth in subdivision one of this

section, and in addition to the powers conferred on stock corporations

by general laws, the corporation shall, subject to the restrictions and

limitations contained in this article, have the following powers:

(a) To issue and sell for cash capital stock of the corporation.

(b) To issue and sell its debentures bearing such interest rates and

having such maturities and other terms and provisions as may be

determined by the board of directors of the corporation.

(c) To invest in bonds and mortgages or notes and mortgages upon

improved and unencumbered real property in areas in this state

designated by the board of directors of the corporation as blighted,

over-crowded, or deteriorating areas, subject to the following

conditions:

(i) The board of directors shall be satisfied with respect to each

loan that it is economically sound.

(ii) No such loan shall be in an amount in excess of eighty per centum

of the corporation's appraised value of such real property, except that

such loan may exceed eighty per centum when guaranteed or insured by the

federal government or any agency thereof.

(iii) Any appraisal of such property shall be based on its long-term

economic value with due consideration being given, among other factors,

to its physical maintenance and, in the case of income-producing

properties, to its stabilized rental value after adequate vacancy

allowances. Except in cases of new construction no appraisal of an

income-producing property shall be undertaken by the corporation unless

it has first been supplied by the loan applicant with a current rent

roll and statement of income and expense for the twelve-month period

preceding the date of the loan application, certified by such loan

applicant and in form and substance satisfactory to the corporation.

(iv) No loan shall be made on any existing housing accommodation

unless (a) such housing accommodation is in physical condition

satisfactory to the corporation or (b) the loan applicant is committed

to restore such housing accommodation to satisfactory condition prior to

the loan closing, or, at the discretion of the corporation, within a

specified period after closing, out of the proceeds of the loan.

(v) No loan shall be made on a housing accommodation unless (a) such

housing accommodation has a suitable heating system satisfactory to the

corporation, or (b) the loan applicant is committed to install suitable

heating facilities out of the proceeds of such loan.

(vi) Any such loan shall be for one or more of the following purposes

only:

A. To finance the improvement or rehabilitation of an existing housing

accommodation.

B. To consolidate, refinance or liquidate existing mortgage

indebtedness on a housing accommodation.

C. To finance the bona fide purchase of a housing accommodation,

provided that except in cases of loans insured or guaranteed by the

federal government or any agency thereof, the purchaser of the real

property which is to constitute the security for the proposed loan has

paid to the seller in cash an amount equal to at least twenty per centum

of the purchase price of such real property.

D. To finance the construction of new housing accommodations.

(vii) The board of directors of the corporation shall cause to be

included in each mortgage the following protective provisions and

restrictions (in addition to those contained in the statutory form M

mortgage with lien covenant as contained in section two hundred

fifty-eight of the real property law), provided that any and all of the

said provisions and restrictions may be waived by the corporation where

the corporation is purchasing or otherwise acquiring an already existing

mortgage:

A. A provision requiring the mortgagor to obtain the prior written

consent of the holder of the first mortgage to the creation of any

junior liens, charges or encumbrances affecting the real property. In

its sole and absolute discretion the corporation may modify or waive the

inclusion of this provision in any mortgage.

B. A provision requiring the mortgagor to accumulate and maintain with

the holder of the first mortgage, so long as the mortgage is held by it,

a fund for the proper repair and maintenance of the mortgaged premises.

The amount and type of such fund and conditions under which it shall be

accumulated, applied and replenished shall be specified in the mortgage.

Such fund may be applied from time to time to the repair or maintenance

of the property by the mortgagor with the written consent of the holder

of the first mortgage. Such fund shall be applied by the mortgagor at

the direction of such holder, when such application is deemed necessary

by such holder for the reasonable protection of the property. In its

sole and absolute discretion the corporation may waive the inclusion of

this provision in any mortgage.

C. A provision permitting the mortgagor to repay the principal amount

of the loan or any part thereof at any time without penalty, except that

the mortgage may, in the discretion of the board of directors, contain a

provision for a prepayment penalty not exceeding two per centum of any

amount repaid within three years after the closing of the loan in

addition to such regular repayments without penalty as may be provided

in the mortgage.

(viii) No loan shall be made by the corporation unless the real

property which is to secure such loan is, or upon application of the

loan proceeds will be, unencumbered, and the corporation shall have been

furnished with satisfactory evidence that such real property is or upon

application of the loan proceeds will be in compliance with all

applicable laws, ordinances and regulations of governments, whether

federal, state, county or municipal, or agencies or instrumentalities

thereof, having jurisdiction.

(ix) Such other and further conditions as the board of directors in

its sole and absolute discretion may deem advisable in the interest of

conducting the affairs of the corporation in accordance with sound

economic and mortgage lending principles.

(x) The mortgage shall provide that violation of any of the foregoing

conditions by the mortgagor shall constitute an event of default,

entitling the holder of the first mortgage to accelerate maturity of the

mortgage obligation.

(xi) The mortgage shall provide for maturity of the loan and

amortization thereof at such rate as shall be deemed appropriate by the

board of directors in accordance with sound mortgage lending practice,

provided that except in cases of loans insured or guaranteed by the

federal government or any agency thereof, no mortgage shall have a

maturity in excess of twenty years from the date of closing.

(xii) The enumeration herein, or in any lending rules or regulations

promulgated by the corporation, of conditions or criteria relating to

the granting of any mortgage loan shall impose no obligation on the

corporation to grant any application for a loan which fulfills such

conditions or criteria. The authority of the corporation to decline any

loan application for any reason whatsoever shall be absolute and

unconditional.

(xiii) Nothing contained in this article shall be construed as

signifying a legislative intent to define what constitutes prudent

lending practice for banking, insurance or other organizations.

(d) To sell without recourse bonds and mortgages or notes and

mortgages acquired pursuant to subdivision three (c) of this section, at

such prices and upon such terms and conditions as the board of directors

of the corporation shall determine; to service or continue to service

such bonds and mortgages and to manage such properties for any of its

members, provided that if the purchaser be a member, the said bond and

mortgage or note and mortgage is in all respects eligible for investment

by the particular member purchasing the same.

(e) To acquire, subscribe for, own, hold, sell, assign, transfer,

pledge or otherwise dispose of obligations of the United States with

maturities not in excess of three years.

(f) For the purpose of protecting its interests, to release any

obligation to pay or guarantee the payment of principal or interest, or

otherwise to waive or modify any of the terms and conditions of any bond

and mortgage, and of any note and mortgage, and to extend or re-extend

any bond and mortgage, and any note and mortgage, and to accept a sum

less than the principal amount thereof in the full payment and

satisfaction of the same.

(g) In addition to interest rates within legal limits the corporation

may impose a service charge upon the mortgagor or owner which shall not

exceed two per centum of the total amount of the loan.

(h) To apply for status as an approved mortgagee under the national

housing act and to act as a mortgagee under said act.

4. The corporation shall have the power to purchase, receive, hold,

lease or otherwise acquire, and to sell, convey, mortgage, lease, pledge

or otherwise dispose of, upon such terms and conditions as its board of

directors may deem advisable, real and personal property, together with

such rights and privileges as may be incidental and appurtenant thereto

and the use thereof, including, but not restricted to, any real or

personal property acquired by such corporation, from time to time in the

satisfaction of debts or enforcement of obligations, provided that the

corporation may purchase or acquire only the following real estate:

(a) Plots whereon there are or may be erected buildings suitable for

the convenient transaction of the business of the corporation.

(b) Such real property as shall be conveyed to it in satisfaction of

debts previously contracted in the course of its business.

(c) Such real estate as it shall purchase at sales under judgments,

decrees or mortgages held by it.

(d) In lieu of instituting an action to foreclose a mortgage lien, the

corporation may purchase a deed to the underlying real property.