N.Y. Private Housing Finance Law § 654-d: Residential mortgage insurance corporation

§ 654-d. Residential mortgage insurance corporation. 1. Definitions.

As used in this section, the following words and terms shall have the

following meanings unless the context shall indicate another or

different meaning or intent:

(a) "Cash equivalent". A letter of credit, insurance policy, surety,

guarantee, indemnity or other security arrangement.

(b) "Financial institution". (i) Any bank, trust company, national

bank, state or federal savings bank, state or federal savings and loan

association, or state or federal credit union, insurance company,

pension fund or retirement system of any corporation, association, any

other entity which is owned or controlled by any one or more of the

above, provided such bank, trust company, national bank, state or

federal savings bank, state or federal savings and loan association, or

state or federal credit union, insurance company, pension fund or

retirement system of any corporation or association, and, if an entity

which is owned by one or more of the above, such entity, is supervised

by or responsible to any agency of the federal government, the state,

any department thereof or the governing body of any city, town or

village of the state, or (ii) any other entity approved by the

subsidiary corporation, or (iii) any one or more of the above when

lawfully acting as a trustee or otherwise in a fiduciary capacity. The

term "financial institution" shall also include the New York state

housing finance agency, the New York state medical care facilities

finance agency, the state of New York mortgage agency, the New York

state urban development corporation, the corporation, the New York city

department of housing preservation and development, the community

preservation corporation, any governmental agency of the United States

which customarily makes, purchases or holds residential mortgages and

any person who is approved as a mortgage lender by the federal housing

administration for purposes of insurance issued by such administration

or licensed by the state of New York as a mortgage banker.

(c) "Housing accommodation". Any existing building, structure, unit

thereof (including an owner-occupied unit in a condominium and a

lessee-occupied dwelling unit in which the lessee retains a proprietary

lease with respect to such dwelling unit and has an allocable ownership

interest in a cooperative housing corporation) or unimproved real

property, which is used or occupied, or is intended to be used or

occupied as the home or residence of one or more persons, a portion of

which may also be used for commercial and other community facilities

ancillary to such residence provided that, in the case of any housing

accommodation consisting of more than six dwelling units, the floor area

of above-ground commercial facilities shall not exceed one-quarter of

the above-ground floor area of such housing accommodation (inclusive of

such commercial facilities).

(d) "Housing insurance contracts". All contracts entered into by the

subsidiary corporation to insure mortgages pursuant to this section, but

not including (i) any contracts to insure mortgages entered into by the

predecessor corporation which are imposed upon and assumed by the

subsidiary corporation pursuant to paragraph (d) of subdivision two of

this section, or (ii) any contracts to insure mortgages entered into by

the subsidiary corporation with respect to which a commitment to insure

was issued by the predecessor corporation.

(e) "Housing insurance fund". The housing insurance fund as

established pursuant to subdivision twelve of this section.

(f) "Housing insurance fund requirement". As of any particular date of

computation, an amount equal to the aggregate of (i) one hundred per

centum of the insured amounts due and payable by the subsidiary

corporation pursuant to housing insurance contracts, plus (ii) twenty

per centum of the insured amounts under housing insurance contracts

other than insured amounts which are due and payable pursuant to (i)

above, plus (iii) twenty per centum of the amounts to be insured under

housing insurance contracts pursuant to the subsidiary corporation's

commitments to insure.

(g) "Mortgage". A first mortgage on real property located within the

city of New York, securing a preservation loan or a rehabilitation loan,

with a term not to exceed forty years, on real estate, held in fee

simple or on a leasehold under a lease having a period of years to run

at the time a mortgage is insured under this section of at least twenty

per centum greater duration than the remaining term of such mortgage;

the term "first mortgage" means such first liens as are commonly given

to secure advances on, or the unpaid purchase price of, real estate

under the laws of the state, together with the credit instruments, if

any, secured thereby.

(h) "Mortgage insurance contracts". All contracts to insure mortgages

entered into by the predecessor corporation that are imposed upon and

assumed by the subsidiary corporation pursuant to paragraph (d) of

subdivision two of this section and all contracts to insure mortgages

entered into by the subsidiary corporation with respect to which a

commitment to insure was issued by the predecessor corporation.

(i) "Mortgage insurance fund". The mortgage insurance fund as

established pursuant to subdivision twelve of this section.

(j) "Mortgage insurance fund requirement". As of any particular date

of computation, an amount equal to the aggregate of (i) one hundred per

centum of the insured amounts due and payable by the subsidiary

corporation pursuant to mortgage insurance contracts, plus (ii) an

amount equal to the greater of (A) seven million five hundred thousand

dollars or (B) twenty per centum of the insured amounts under mortgage

insurance contracts other than insured amounts which are due and payable

under subparagraph (i) of this paragraph, plus (iii) twenty per centum

of the amounts to be insured under the predecessor corporation's

commitments to insure; provided, however, that notwithstanding the

foregoing, at no time shall the mortgage insurance fund requirement

exceed the aggregate of (1) insured amounts due and payable by the

subsidiary corporation pursuant to mortgage insurance contracts, plus

(2) one hundred per centum of the insured amounts under mortgage

insurance contracts other than insured amounts which are due and payable

under clause (1) of this paragraph, plus (3) one hundred per centum of

the amounts to be insured under the predecessor corporation's

commitments to insure.

(k) "Mortgagee". The mortgage lender under a mortgage insured by the

predecessor corporation or insured pursuant to subdivision ten of this

section, and its successors and assigns.

(l) "Mortgage loan". A mortgage loan secured by a mortgage.

(m) "Mortgagor". The original borrower under a mortgage loan insured

by the predecessor corporation or insured pursuant to subdivision ten of

this section, and its successors and assigns.

(n) "Multi-family housing accommodation". A housing accommodation with

five or more dwelling units.

(o) "Operating expenses". All costs of administering the subsidiary

corporation, including, but not limited to, salaries and wages, expenses

of administering staff functions, fees of professional consultants,

legal fees, charges incurred for servicing of mortgage loans, money

management fees, office rents, utility charges, costs of supplies,

furnishings, equipment, machinery and apparatus, maintenance and repair

of property, payment to the corporation for services rendered, amounts

due and owing under contracts validly entered into by the predecessor

corporation or the subsidiary corporation, other than mortgage insurance

contracts and housing insurance contracts, respectively, and other

expenses incurred in connection with any of the foregoing.

(p) "Other real property". Any building, structure or unimproved

property which is used or occupied, or is intended to be used or

occupied, primarily for emergency, transitional or shelter housing, a

portion of which may also be used for commercial and other community

facilities ancillary to such use provided that, the floor area of

above-ground commercial facilities shall not exceed one-quarter of the

above-ground floor area of such other real property (inclusive of such

commercial facilities).

(q) "Predecessor corporation". The New York city rehabilitation

mortgage insurance corporation created by section one of chapter nine

hundred twenty-four of the laws of nineteen hundred seventy-three,

being, prior to repeal, article fourteen of the private housing finance

law.

(r) "Preservation loan". A mortgage loan extended by a financial

institution with a term not to exceed forty years for the purposes of

refinancing existing indebtedness secured by one or more mortgages on a

housing accommodation or other real property located within the city of

New York and/or financing the acquisition of a housing accommodation or

other real property located within the city of New York and which

otherwise complies with the conditions established pursuant to

subdivision ten of this section.

(s) "Rehabilitation". Repairs, alterations or improvements of a

housing accommodation or other real property designed to raise the

housing standards therein or, in the case of other real property,

designed to provide needed improvements therein. Rehabilitation shall

also include the construction of a housing accommodation or other real

property.

(t) "Rehabilitation loan". A mortgage loan extended by a financial

institution with a term not to exceed forty years which may include the

refinancing of existing indebtedness, if any, secured by one or more

mortgages on the housing accommodation or other real property to be

rehabilitated, or financing the acquisition of the housing accommodation

or other real property to be rehabilitated, which housing accommodation

or other real property shall be located within the city of New York and

which otherwise complies with the conditions established pursuant to

subdivision ten of this section, provided, however, that a sum equal to

at least twenty-five percent of the amount of the mortgage loan shall be

used for the cost of rehabilitation of, or construction of improvements

on, a housing accommodation or other real property.

2. New York city residential mortgage insurance corporation. (a) There

is hereby established a public benefit corporation known as the "New

York city residential mortgage insurance corporation" as a subsidiary

corporation of the corporation. The purpose of such subsidiary

corporation shall be to insure mortgage loans in order to promote the

preservation of neighborhoods which are blighted, are becoming blighted

or may become blighted, to discourage disinvestment and encourage the

investment of mortgage capital in such neighborhoods and to provide

safe, sanitary and affordable housing accommodations to persons and

families for whom the ordinary operations of private enterprise cannot

supply such accommodations.

(b) The subsidiary corporation shall be the successor to the

predecessor corporation.

(c) All property and rights of the predecessor corporation (other than

moneys of the predecessor corporation) are hereby passed to and vested

in the subsidiary corporation, subject, however, to all outstanding

contracts of insurance, commitments to insure mortgages, and all

outstanding obligations of the predecessor corporation. All moneys of

the predecessor corporation (including, but not limited to, amounts held

in the mortgage insurance fund established pursuant to section seven

hundred nine of this chapter, prior to said section being repealed) and

all moneys held in the remic premium reserve fund established pursuant

to said section seven hundred nine shall be transferred to the city;

provided that as a condition to said transfer, a like amount of money

shall be transferred from the corporation to the subsidiary corporation

to be deposited into the mortgage insurance fund, the housing insurance

fund and the remic premium reserve fund (all established pursuant to

subdivision twelve of this section) in such amounts as shall be

determined by the subsidiary corporation, subject to the provisions of

paragraph (a) of subdivision twelve of this section.

(d) All debts, liabilities, obligations, contracts, agreements, and

covenants of the predecessor corporation (including, but not limited to,

contracts of insurance and commitments to insure mortgages) are hereby

imposed upon and shall be assumed by the subsidiary corporation. All

persons having claims under any contracts of insurance or commitments to

insure mortgages entered into with the predecessor corporation may

enforce those claims against the subsidiary corporation in the same

manner as they might have against the predecessor corporation, and the

rights and remedies of such persons shall not be limited or restricted

in any manner by this section. The foregoing notwithstanding, the debts,

liabilities, obligations, contracts, agreements and covenants of the

predecessor corporation shall not be imposed upon the corporation. All

persons having claims under any contracts of insurance or commitments to

insure mortgages entered into with the predecessor corporation shall

have no right to enforce those claims in any manner against the

corporation.

(e) In continuing the functions and carrying out the contracts,

obligations and duties of the predecessor corporation, the subsidiary

corporation is hereby authorized to act in its own name or in the name

of the predecessor corporation as may be convenient or advisable.

(f) All regulations of the predecessor corporation shall continue to

be in effect as the regulations of the subsidiary corporation until

amended, supplemented or rescinded by the subsidiary corporation in

accordance with law.

3. Assistance; privileges. (a) The subsidiary corporation may receive

moneys from the corporation, the state, any public benefit corporation,

the city, the federal government or any other source for public purposes

set forth in this section.

(b) The subsidiary corporation may contract for and accept any gifts

or grants or loans of funds or property or financial or other aid in any

form from the federal government or any agency or instrumentality

thereof, or from the state or any agency or instrumentality thereof,

including the city and the corporation, or from any other source, public

or private, and to comply, subject to the provisions of this section,

with the terms and conditions thereof.

(c) The city and the corporation are each hereby authorized to, but

neither is required to, make gifts, grants or loans of funds or property

or financial or other aid in any form to the subsidiary corporation and

to enter into any contracts or other agreements with the subsidiary

corporation, on such terms and conditions as the city or the

corporation, as applicable, and the subsidiary corporation may agree

upon, all in furtherance of the public purposes set forth in this

section.

(d) All domestic corporations or associations organized for the

purpose of carrying on business in this state, public benefit

corporations, public employee pension funds and any other persons,

corporations or associations are hereby authorized to make contributions

to the subsidiary corporation.

(e) The subsidiary corporation shall have all the privileges,

immunities, tax exemptions and other exemptions of the corporation to

the extent the same are not inconsistent with this section.

4. Membership. The membership of such subsidiary corporation shall

consist of nine members, seven of whom shall be members of the

corporation and two of whom shall be appointed by the mayor. The members

who are not members of the corporation shall serve for terms ending two

and four years respectively from January first next succeeding the date

of their appointment. The successors of the members who are not members

of the corporation shall serve for terms of four years each. A member

who is not a member of the corporation shall continue in office until

his or her successor has been appointed and qualified. With respect to

any member who is not a member of the corporation, the mayor shall fill

any vacancy which may occur by reason of death, resignation or otherwise

for the remaining unexpired term of such member. A member who is not a

member of the corporation may be removed by the mayor for cause, but not

without an opportunity to be heard in person or by counsel, in such

member's defense, upon not less than ten days' notice. The powers of the

subsidiary corporation shall be vested in and exercised by no less than

five of the members thereof then in office. The subsidiary corporation

may delegate to one or more of its members, or its officers, agents and

employees, such duties and powers as it may deem proper. The

commissioner of the department of housing preservation and development

shall serve as chairperson of the subsidiary corporation. The president

of the corporation shall serve as president of the subsidiary

corporation.

5. Compensation. Notwithstanding any inconsistent provisions of this

or any other general, special or local law, no officer or employee of

the corporation, the city or the state, or of any public corporation, as

defined in the general construction law, shall be deemed to have

forfeited or shall forfeit such person's office or employment or any

benefits provided under the retirement and social security law or under

any public retirement system maintained by the state or by the civil

divisions thereof by reason of such person's acceptance of membership on

or by virtue of such person's being an officer, employee or agent of the

subsidiary corporation. The members may engage in private employment or

in a profession or business, unless otherwise prohibited from doing so

by virtue of holding another public office, subject to the provisions of

article eighteen of the general municipal law. For the purposes of such

article eighteen, the subsidiary corporation shall be a "municipality"

and a member shall be a "municipal officer". No member of the subsidiary

corporation shall receive additional compensation, either direct or

indirect, other than reimbursement for actual and necessary expenses

incurred in the performance of such person's duties, by reason of such

person serving as a member of the subsidiary corporation.

6. Transfer of resources. The city and the corporation shall have the

power to, but shall not be obligated to, transfer to the subsidiary

corporation such agents, employees and facilities, including any real

and/or personal property, in order to carry out the purposes of this

section.

7. Termination. The subsidiary corporation and its corporate existence

shall continue until terminated by law; provided, however, that no such

law shall take effect so long as the subsidiary corporation shall have

contracts to insure mortgages (including mortgage insurance contracts

and housing insurance contracts), commitments to insure, notes, bonds,

or other obligations outstanding, unless adequate provision has been

made for the payment thereof. Upon termination of the existence of the

subsidiary corporation all of its rights and properties shall pass to

and be vested in the corporation.

8. Powers. The subsidiary corporation shall have the power:

(a) To sue and be sued;

(b) To have a seal and alter the same at pleasure;

(c) To make and alter by-laws for its organization;

(d) To adopt, amend or rescind rules and regulations appropriate to

carry out its corporate purposes, including rules and regulations

governing the use of its property and facilities and to establish such

requirements and enter into such agreements to achieve the objectives of

this section;

(e) To make and execute contracts and all other instruments necessary

or convenient for the exercise of its powers and functions under this

section;

(f) To acquire, hold and dispose of real and/or personal property for

its corporate purposes;

(g) To engage the services of private consultants on a contract basis

for rendering professional and technical assistance and advice;

(h) To appoint officers, agents and employees, prescribe their duties

and qualifications and fix their compensation;

(i) To invest any funds, or other moneys under its custody and control

in the same manner as the corporation;

(j) To establish and levy fees and charges in connection with the

processing of applications for mortgage insurance and fix premium

charges for mortgage insurance;

(k) To enter into commitments to insure mortgages and contracts of

insurance and enter into any additional agreements as the subsidiary

corporation deems appropriate to further the objectives of this section;

(l) To fulfill its obligations and enforce its rights under any

contract of insurance, or commitment to insure so furnished as provided

in this section and such rules and regulations as may be adopted by the

subsidiary corporation;

(m) To pay, pursue to final collection, compromise, waive or release

any right, title, claim, lien or demand, however acquired, including any

equity or right of redemption;

(n) To foreclose any mortgage in default or commence any action to

protect or enforce any right conferred upon it by any law, mortgage,

contract or other agreement, and to bid for and purchase such property

at any foreclosure or at any other sale, or otherwise to acquire or take

possession of any such property;

(o) To deal with, hold, administer, manage, rent, repair, insure or

sell, lease or otherwise dispose of any property conveyed to or acquired

by the subsidiary corporation and to enter into agreements with the

state, the city, or any person, firm, entity, partnership or

corporation, either public or private, with regard thereto;

(p) To procure insurance against any loss in connection with its

property and other assets and to procure reinsurance in connection with

its obligations, all in such amounts and from such insurers as it deems

necessary or desirable;

(q) To consent to the modification, with respect to rate of interest,

time of payment of any installment of principal or interest, security or

any other term, of any mortgage, mortgage loan, contract or agreement of

any kind which the subsidiary corporation has insured or to which the

subsidiary corporation is a party;

(r) To sell, at public or private sale, any mortgage, mortgage

participation or other obligation held by the subsidiary corporation;

(s) To procure cash equivalents for deposit in its funds;

(t) To enter into co-insurance agreements with any entity authorized

by law to provide mortgage insurance with respect to property located

within the city of New York, including, but not limited to the state of

New York mortgage agency and the United States department of housing and

urban development;

(u) To do any and all things necessary or convenient to carry out its

purposes and exercise the powers expressly given and granted in this

section.

9. Classification of housing accommodations. The subsidiary

corporation may classify housing accommodations within the city and

approve any of such classes as eligible for insurance pursuant to this

section and enact separate guidelines dealing with the provision and

extent of such insurance.

10. Insurance of mortgage loans. (a) The subsidiary corporation is

authorized, subject to the provisions of this section, to make

commitments to insure and to contract to insure mortgage loans eligible

for insurance hereunder.

(b) The subsidiary corporation shall limit its insurance on a

rehabilitation or preservation loan to an amount not in excess of fifty

per centum of the outstanding principal indebtedness, provided, however,

that the subsidiary corporation may insure an amount not in excess of

seventy-five per centum of the outstanding principal indebtedness of a

rehabilitation loan if it shall find that the extent of rehabilitation

is sufficient to justify such additional insurance, provided further,

however, that the subsidiary corporation may insure an amount not to

exceed the full outstanding principal indebtedness of a rehabilitation

or preservation loan when such mortgage loan has been made by a public

benefit corporation of the state of New York which public benefit

corporation has issued or will issue bonds or notes, some or all of the

proceeds of which bonds or notes were used or will be used to make such

mortgage loan, or when the mortgage loan has been made by a public

employee pension fund. The foregoing notwithstanding, the sum of the

percentage of any mortgage loan insured by the subsidiary corporation

and the percentage of such loan insured or to be insured by any other

party shall not exceed one hundred per centum of the outstanding

principal indebtedness of such mortgage loan.

(c) The subsidiary corporation shall not issue a commitment to insure

or a housing insurance contract unless upon the issuance thereof amounts

on deposit in the housing insurance fund will at least equal the housing

insurance fund requirement.

(d) Except for mortgage insurance contracts and except as otherwise

provided in paragraph (e) of this subdivision, the subsidiary

corporation shall not issue a commitment to insure nor shall it insure

any mortgage loan unless it shall first find (i) that the property which

is the security for such mortgage loan is located in a neighborhood

within the city of New York characterized by a deficiency of available

mortgage financing; (ii) that such deficiency has caused or threatens to

cause undermaintained and deteriorating housing accommodations and

substandard and unsanitary neighborhoods; (iii) that the granting of

such mortgage loan will aid in the preservation or rehabilitation of the

neighborhood in which such property is located; (iv) that, if the

property which is the security for such mortgage loan is other real

property, the granting of such mortgage loan will assist in preventing

the deterioration of residential housing in the neighborhood in which

such property is located; and (v) that the property which is the

security for such loan meets such other requirements as the subsidiary

corporation may from time to time establish by guidelines adopted by the

subsidiary corporation. Any such determination by the subsidiary

corporation shall be conclusive and final and shall not be subject to

review of any kind or nature or in any manner whatsoever and shall not

give rise to any liability on the part of the subsidiary corporation.

(e) The subsidiary corporation may issue a commitment to insure and

may insure any mortgage loans, notwithstanding the criteria set forth in

subparagraph (i), (ii), (iii) or (iv) of paragraph (d) of this

subdivision provided that it shall find the property which is the

security for such mortgage loan or mortgage loans is either: (i) located

within the city of New York in an empire zone designated pursuant to

article eighteen-B of the general municipal law, or (ii) will provide

safe, sanitary and affordable housing for persons and families for whom

the ordinary operations of private enterprise cannot supply such

housing, or (iii) the entity providing the mortgage financing was or is

created by local, state or federal legislation and certifies to the

subsidiary corporation that the housing accommodations or other real

property are located within the city of New York and meet the program

criteria applicable to such entity. In addition, the subsidiary

corporation may enter into any mortgage insurance contract,

notwithstanding the criteria set forth in subparagraph (i), (ii), (iii)

or (iv) of paragraph (d) of this subdivision provided that with respect

to such mortgage insurance contract, a commitment to insure shall have

been previously issued by the predecessor corporation.

(f) The subsidiary corporation may issue a commitment to insure and

may insure an existing mortgage loan, when an application for such

mortgage insurance has been submitted prior to the making of such

mortgage loan, and significant circumstances beyond the reasonable

control of the mortgagor and mortgagee necessitate the making of the

mortgage loan prior to the issuance of the commitment to insure and when

it is determined by the subsidiary corporation that such mortgage loan

would not have been made except for the reasonable expectation that the

subsidiary corporation would insure the mortgage loan.

(g) To be eligible for insurance under this section, a mortgage loan

shall be a preservation loan and/or a rehabilitation loan and (i) bear

interest, exclusive of premium charges fixed by the subsidiary

corporation, at a rate not in excess of the rate of interest authorized

by law and not in excess of a maximum rate of interest established by

the subsidiary corporation from time to time. In making its

determination of appropriate maximum interest rate, the subsidiary

corporation shall take into account the rates of interest prevalent in

the mortgage market, current data on secondary market yields and

discount and/or premium levels; (ii) unless the subsidiary corporation

in its sole discretion shall otherwise determine, provide for

substantially equal and constant periodic payments of principal and

interest in amounts sufficient to pay all interest and effect full

repayment of principal within the term of the mortgage loan; (iii)

contain terms with respect to the prepayment, insurance, repairs,

alterations, payment of taxes, special assessments, service charges,

default reserves, delinquency charges, foreclosure proceedings,

additional and secondary liens, and such other matters as the subsidiary

corporation may in its discretion prescribe; (iv) be accompanied by

certificates, issued by such officers of the mortgagee, independent

appraisers or other persons as the subsidiary corporation may require,

certifying that: (A) where appropriate, the annual income to be derived

from the property equals not less than one hundred five per centum of

the annual charges and expenses, including provision for reserves,

satisfactory to the subsidiary corporation, for the amortization of

subordinate mortgage loans over the remaining terms of such mortgage

loans regardless of whether the terms of such subordinate mortgage loans

include scheduled amortization of principal; (B) the remaining useful

life of the property is greater than the term of the mortgage; and (C)

the housing accommodation or other real property does not contain any

substantial violations of the housing maintenance code or the multiple

dwelling law, except that in the case of a mortgage loan made to the

owner of a housing accommodation or other real property containing any

such violations, the subsidiary corporation may insure or commit to

insure such mortgage loan if the mortgagee and the owner have submitted

a plan, satisfactory to the subsidiary corporation to eliminate such

violations; and (v) satisfy such additional terms and conditions as the

subsidiary corporation may prescribe.

(h) In addition to the conditions set forth in paragraphs (d) through

(g) in this subdivision, the subsidiary corporation shall not insure nor

issue a commitment to insure any rehabilitation loan unless it shall

find (i) that rehabilitation is necessary to upgrade the property, (ii)

that rehabilitation will not necessitate more than a minimum amount of

relocation of the residents of any housing accommodation and (iii) that

the rehabilitation undertaken with the proceeds of the rehabilitation

loan has been completed.

(i) A financial institution may request insurance by written

application to the subsidiary corporation in such form and manner,

together with such information and documents, as the subsidiary

corporation may prescribe. No application shall be complete unless and

until the financial institution has paid such processing fees and other

charges as the subsidiary corporation may impose in connection

therewith. The subsidiary corporation shall signify its acceptance of

such application for insurance by issuance of a commitment to insure or

a contract of insurance.

(j) The subsidiary corporation shall not issue a commitment to insure

a mortgage loan extended by the corporation unless such commitment to

insure is approved by at least two members of a committee composed of

the chairperson of the subsidiary corporation and the members of the

subsidiary corporation who are not members of the corporation.

11. Payment of insurance. The subsidiary corporation shall establish

procedures to be followed by a mortgagee in the event of a default under

the terms of any mortgage insured by the subsidiary corporation,

provided, however, any modification to such procedures (other than to

cure any ambiguity, defect or omission) shall apply only to mortgages

for which commitments have been issued after the effective date of such

modification. The subsidiary corporation may establish prerequisites for

payment of an insurance claim, including, but not limited to, requiring

the mortgagee to take such actions with respect to the property securing

the defaulted mortgage as may be specified by the subsidiary corporation

to be satisfactory evidence of a continuing default, including but not

limited to the following actions: (i) becoming lawfully the mortgagee in

possession thereof; (ii) causing a receiver to be appointed of such

property; (iii) obtaining voluntary conveyance of the mortgagor's right

and title to such property; or (iv) obtaining by foreclosure clear and

unencumbered title to such property, all in such manner as the

subsidiary corporation may require. Following submission of a valid

claim, the subsidiary corporation shall pay an amount which shall not

exceed the lesser of: (A) the then outstanding principal amount of the

mortgage multiplied by the per centum of such outstanding amount insured

by the subsidiary corporation plus that per centum of the mortgagee's

cost arising from the default, inclusive of public liens and delinquent

and unpaid interest, all as the subsidiary corporation may from time to

time allow, which per centum shall not exceed the per centum of the

outstanding principal indebtedness insured by the subsidiary corporation

or (B) the insured amount of the mortgage loan at the date of execution

of the contract of insurance or its latest amendment, if any, except

that the subsidiary corporation shall pay the greater of the two amounts

on claims by a public employee pension fund or by a public benefit

corporation from mortgage loans financed by the sale of notes or bonds

issued by said corporation and such amount payable may, if so provided

in the contract of insurance, include accrued interest to the date of

redemption for such bonds or notes and any cost associated with such

redemption, provided that no more than the actual loss suffered by such

public benefit corporation or public employee pension fund shall be

paid. Such payment may be made by the subsidiary corporation in a lump

sum, or in partial payments made within such period of time, not in

excess of two years, as may be agreed to between the subsidiary

corporation and the mortgagee, all in accordance with procedures to be

established by the subsidiary corporation. The subsidiary corporation

shall have the power to bid for and purchase the property securing the

defaulted mortgage at any foreclosure or other sale of such property, or

to otherwise acquire or take possession of such property in accordance

with other provisions of law. In the event of any such purchase,

acquisition, or taking of possession, the subsidiary corporation shall

have the power to complete, administer, sell, dispose of, and otherwise

deal with such property, in such manner as may be necessary or desirable

to protect the interests of the subsidiary corporation.

12. Mortgage insurance fund, housing insurance fund and remic premium

reserve fund. (a) The subsidiary corporation shall create and establish

a fund to be known as the "mortgage insurance fund" which shall be used

as a revolving fund for carrying out the provisions of this section with

respect to mortgage insurance contracts and shall, upon its creation,

pay into such fund moneys made available to the subsidiary corporation

from the corporation in an amount equal to the mortgage insurance fund

requirement as of such date for the purpose of such fund, and shall

thereafter, pay into such fund, upon receipt, (i) such portion of

mortgage insurance contract premium payments in an amount equal to the

amount necessary to be transferred to the mortgage insurance fund in

order that the amount on deposit therein be equal to the mortgage

insurance fund requirement (or such lesser amount as may be available);

(ii) such portion of the proceeds received by the subsidiary corporation

in connection with the exercise of such subsidiary corporation's rights

under any mortgage insurance contract in an amount equal to the amount

necessary to be transferred to the mortgage insurance fund in order that

the amount on deposit therein be equal to the mortgage insurance fund

requirement (or such lesser amount as may be available); (iii) any

moneys appropriated, paid or otherwise made available by the city or the

corporation for the purpose of such fund; and (iv) any other moneys

which may be made available to the subsidiary corporation for the

purpose of such fund from any other source. All moneys held in the

mortgage insurance fund, except as hereinafter provided, shall be used,

as required, solely for the payment of the subsidiary corporation's

liabilities arising from mortgage insurance contracts; provided,

however, that moneys in such fund shall not be withdrawn therefrom at

any time in such amount as would reduce the amount of such fund to less

than the mortgage insurance fund requirement, except for the purposes of

paying such liabilities, as the same become due and for the payment of

which other moneys of the subsidiary corporation are not available. Any

income or interest earned by, or increment to, the mortgage insurance

fund due to the investment thereof or any amount in excess of the

mortgage insurance fund requirement shall be transferred at least

annually by the subsidiary corporation to the remic premium reserve fund

or, at the written direction of the chairperson, to such other funds or

accounts of the subsidiary corporation to the extent it does not reduce

the amount of the mortgage insurance fund below the mortgage insurance

fund requirement.

(b) The subsidiary corporation shall create and establish a fund to be

known as the "housing insurance fund" which shall be used as a revolving

fund for carrying out the provisions of this section with respect to

housing insurance contracts and shall, upon its creation, pay into such

fund any moneys or cash equivalents made available to the subsidiary

corporation from the corporation for the purpose of such fund, and shall

thereafter, pay into such fund, upon receipt, (i) such portion of

housing insurance contract premium payments in an amount equal to the

amount necessary to be transferred to the housing insurance fund in

order that the amount on deposit therein be equal to the housing

insurance fund requirement (or such lesser amount as may be available);

(ii) such portion of the proceeds received by the subsidiary corporation

in connection with the exercise of such subsidiary corporation's rights

under any housing insurance contract in an amount equal to the amount

necessary to be transferred to the housing insurance fund in order that

the amount on deposit therein be equal to the housing insurance fund

requirement (or such lesser amount as may be available); (iii) any

moneys or cash equivalents appropriated, paid or otherwise made

available by the city, the federal government or the corporation for the

purpose of such fund; and (iv) any other moneys or cash equivalents

which may be made available to the subsidiary corporation for the

purpose of such fund from any other source. All moneys or cash

equivalents held in the housing insurance fund, except as hereinafter

provided, shall be used, as required, solely for the payment of the

subsidiary corporation's liabilities arising from housing insurance

contracts; provided, however, that moneys or cash equivalents in such

fund shall not be withdrawn therefrom at any time in such amount as

would reduce the amount of such fund to less than the housing insurance

fund requirement, except for the purpose of paying such liabilities, as

the same become due and for the payment of which other moneys of the

subsidiary corporation are not available. Any income or interest earned

by, or increment to, the housing insurance fund due to the investment

thereof or any amount in excess of the housing insurance fund

requirement shall be transferred at least annually by the subsidiary

corporation to the remic premium reserve fund or at the written

direction of the chairperson, to such other funds or accounts of the

subsidiary corporation to the extent it does not reduce the amount of

the housing insurance fund below the housing insurance fund requirement.

(c) The subsidiary corporation shall create and establish such

accounts within the housing insurance fund as may be necessary or

desirable for its corporate purposes.

(d) The subsidiary corporation shall create and establish a fund to be

known as the "remic premium reserve fund" for the purpose of providing

for payment of the subsidiary corporation's liabilities arising from its

operations, its mortgage insurance contracts and its housing insurance

contracts and shall, upon its creation, pay into such fund moneys or

cash equivalents made available to the subsidiary corporation from the

corporation for the purpose of such fund, and shall thereafter, pay into

such fund, upon receipt, (i) the balance of the premium payments, if

any, received by the subsidiary corporation with respect to mortgage

insurance contracts and housing insurance contracts after making the

deposits described in subparagraph (i) of paragraph (a) and subparagraph

(i) of paragraph (b) respectively, of this subdivision; (ii) the balance

of any proceeds received by the subsidiary corporation in connection

with the exercise of such subsidiary corporation's rights under any

mortgage insurance contract or housing insurance contract after making

the deposits described in subparagraph (ii) of paragraph (a) and

subparagraph (ii) of paragraph (b) respectively of this subdivision;

(iii) any moneys or cash equivalents appropriated, paid or otherwise

made available by the city, the federal government or the corporation

for the purpose of such fund; and (iv) any other moneys or cash

equivalents which may be made available to the subsidiary corporation

for the purpose of such fund from any other source.

(e) The subsidiary corporation shall create and establish such

accounts within the remic premium reserve fund as may be necessary for

its corporate purposes.

(f) Except as otherwise provided in this section, all moneys received

by the subsidiary corporation shall be deposited in the remic premium

reserve fund.

(g) If the remic premium reserve fund is funded in whole or in part

with cash, the moneys in such fund shall be deposited in one or more

banks or trust companies designated, in manner provided by law, as

depositories of the funds of the subsidiary corporation. The subsidiary

corporation may invest any moneys in such fund in the same manner as

moneys of the corporation may be invested, provided that such

obligations shall be payable within such time as the proceeds may be

needed to meet expenditures estimated to be incurred by the subsidiary

corporation. Any interest earned or capital gain realized on the money

so deposited or invested shall accrue to and become part of such fund.

The separate indentity of such fund shall be maintained whether its

assets consist of cash or investments or both.

(h) The subsidiary corporation shall transfer from the remic premium

reserve fund such moneys as the subsidiary corporation, by its

chairperson, shall certify are required for the subsidiary corporation

to pay its operating expenses, to pay any liabilities arising from the

subsidiary corporation's mortgage insurance contracts and housing

insurance contracts, and to restore the mortgage insurance fund and the

housing insurance fund to the mortgage insurance fund requirement and

housing insurance fund requirement, respectively.

(i) The subsidiary corporation shall keep a separate account for the

remic premium reserve fund. Such account shall show (i) the date and

amount of each sum paid into the fund, (ii) the interest earned by the

fund, (iii) the capital gains or losses resulting from the sale of

investments of the fund, (iv) the interest or capital gains which have

accrued to the fund, (v) the amount and date of each withdrawal from the

fund, and (vi) the assets of the fund indicating the cash balance

therein and a schedule of the amounts invested.

(j) In computing the amount of the mortgage insurance fund, the

housing insurance fund and the remic premium reserve fund for the

purposes of this section, securities in which all or a portion of such

funds shall be invested shall be valued at par, if purchased at par, or

if purchased at other than par, at amortized value. Amortized value,

when used with respect to securities purchased at a premium above or a

discount below par or if purchased at par, or if purchased at other than

par, shall mean the value as of any given date obtained by dividing the

total premiums or discount at which such securities were purchased by

the number of interest payments remaining to maturity on such securities

after such purchase and by multiplying the amount so calculated by the

number of interest payment dates having passed since the date of such

purchase; and (i) in the case of securities purchased at a premium by

deducting the product thus obtained from the purchase price, and (ii) in

the case of securities purchased at a discount by adding the product

thus obtained to the purchase price.

(k) The subsidiary corporation shall create and establish such other

fund or funds as may be necessary or desirable for its corporate

purposes.

13. Charges and fees. (a) The subsidiary corporation shall fix a

premium charge for its insurance of mortgages pursuant to this section

which shall not be less than the minimum amount nor more than the

maximum amount that the state of New York mortgage agency is permitted

to charge pursuant to applicable provisions of law.

(b) The subsidiary corporation may establish and levy such other

charges and fees in connection with applications for mortgage insurance

and insurance commitments as it may deem appropriate and necessary.

(c) Such premium charges and other charges shall be payable by the

mortgagor in cash in such manner as may be prescribed by the subsidiary

corporation.

(d) Such premium charges and other charges and fees shall not be

deemed to be interest for the purposes of section 5-501 of the general

obligations law.

14. Assistance by the corporation. The corporation is hereby

authorized to perform such functions and services in connection with any

lawful corporate purpose of the subsidiary corporation as shall be

requested by the subsidiary corporation. The subsidiary corporation

shall pay to the corporation from any moneys of the subsidiary

corporation available for such purposes such amounts as are necessary to

pay the corporation for the services rendered by the corporation

pursuant to this section.

15. Assistance by the department of housing preservation and

development. The commissioner of housing preservation and development

and the department of housing preservation and development are hereby

authorized to perform such functions and services in connection with any

lawful corporate purpose of the subsidiary corporation as shall be

requested by the subsidiary corporation. The subsidiary corporation

shall pay to the department of housing preservation and development from

any moneys of the subsidiary corporation available for such purposes

such amounts as are necessary to reimburse the department of housing

preservation and development for the services provided pursuant to this

section.

16. Annual report. The subsidiary corporation shall submit to the

mayor, the comptroller, the director of management and budget and the

corporation within ninety days after the end of its fiscal year, a

complete and detailed report setting forth: (i) its operations and

accomplishments; (ii) its receipts and expenditures during such fiscal

year in accordance with the categories or classifications established by

the subsidiary corporation for its operating and capital outlay

purposes; and (iii) its assets and liabilities at the end of its fiscal

year, including a schedule of mortgages which have been insured during

such year, the status of the mortgage insurance fund, housing insurance

fund and other reserve or special funds established by the subsidiary

corporation.

17. Moneys of the subsidiary corporation. (a) All moneys of the

subsidiary corporation, except as otherwise authorized or provided in

this section, shall be deposited as soon as practicable in a separate

account or accounts in banks or trust companies organized under the laws

of the state or national banking association, in each case doing

business in the city. The moneys in such accounts shall be paid out on

checks signed by such officer or employee of the subsidiary corporation

as the subsidiary corporation shall authorize. All deposits of such

moneys shall, if required by the subsidiary corporation, be secured by

obligations of the United States or of the state or of the city of a

market value equal at all times to the amount of the deposit and all

banks and trust companies are authorized to give such security for such

deposits.

(b) The subsidiary corporation shall prescribe a system of accounts.

(c) The comptroller, or the comptroller's legally authorized

representative, is hereby authorized and empowered from time to time to

examine the books and accounts of the subsidiary corporation including

its receipts, disbursements, contracts, reserve funds, sinking funds,

investments, and any other matters relating to its financial standing.

Such an examination shall be conducted by the comptroller at least once

in every five years; the comptroller is authorized, however, to accept

from the subsidiary corporation, in lieu of such an examination, an

external examination of its books and accounts made at the request of

the subsidiary corporation.

(d) The subsidiary corporation shall submit to the mayor, the

comptroller and the corporation within thirty days of the receipt

thereof by the subsidiary corporation a copy of the report of every

external examination of the books and accounts of the subsidiary

corporation other than copies of the reports of such examinations made

by the comptroller.

18. Rentals. Notwithstanding the provisions of, or any regulation

promulgated pursuant to, the emergency housing rent control law, the

local emergency housing rent control act or local law enacted pursuant

thereto, all dwelling units in a multiple dwelling the rehabilitation of

which commenced after July first, nineteen hundred seventy-seven and

which is financed by a mortgage loan insured by the subsidiary

corporation (including, but not limited to, mortgage loans insured

pursuant to mortgage insurance contracts and housing insurance

contracts), except for dwelling units occupied by reason of ownership of

stock in a cooperative and except for dwelling units that constitute

condominiums, shall be subject to the rent stabilization law of nineteen

hundred sixty-nine, beginning immediately after initial rents, as

established under applicable provisions of this chapter, section four

hundred twenty-one-a of the real property tax law, section four hundred

eighty-nine of the real property tax law and/or subparagraph (m) of

paragraph one of subdivision g of section 26-405 of the administrative

code of the city of New York for such dwelling units to become effective

on the basis of such rehabilitation, provided that any occupant in

possession of a dwelling unit that first becomes subject to the rent

stabilization law of nineteen hundred sixty-nine pursuant to this

section shall be offered a two-year lease notwithstanding any contrary

provisions of, or regulations adopted pursuant to, such rent

stabilization law, at the initial rent established for such dwelling

unit and provided further that such dwelling units, other than those

dwelling units, the initial rents of which are established under

subparagraph (m) of paragraph one of subdivision g of section 26-405 of

the administrative code of the city of New York, shall remain subject to

the rent stabilization law in accordance with the provisions of this

chapter, section four hundred twenty-one-a of the real property tax law

and/or section four hundred eighty-nine of the real property tax law as

the case may be. Except to the extent to which dwelling units, which are

controlled under other provisions of law, become subject to the rent

stabilization law of nineteen hundred sixty-nine pursuant to the

preceding sentence, no dwelling unit shall become subject to the rent

stabilization law solely by reason of insurance of a mortgage loan by

the subsidiary corporation.

19. Employees of the subsidiary corporation. (a) Notwithstanding any

inconsistent provisions of this section, the appointment and promotion

of all employees of and for the subsidiary corporation shall be made in

accordance with the provisions of the civil service law under the

jurisdiction of the city civil service commission and the compensation

for such employees shall be fixed by the subsidiary corporation.

(b) The city, the corporation and the predecessor corporation shall

have the power to provide for the transfer to the subsidiary corporation

of agents, employees and facilities of the city, the corporation or the

predecessor corporation, as the case may be, to enable the subsidiary

corporation to fulfill its corporate purposes. Employees of the city,

the corporation or the predecessor corporation to be transferred to the

subsidiary corporation pursuant to this section shall be eligible for

such transfer and appointment to offices and positions of the subsidiary

corporation without further examination, and all such employees who have

been appointed to positions in city service in accordance with the

provisions of the civil service law under the rules of the city civil

service commission shall have the same status with respect thereto in

the service of the subsidiary corporation as they had in city service.

Employees who are members or beneficiaries of any existing pension or

retirement system shall continue to have such rights, privileges,

obligations or status with respect to such system or systems as are

prescribed by law on the date this section takes effect, and all such

employees who have been appointed to positions in city service in

accordance with the provisions of the civil service law under the rules

of the city civil service commission shall have the same status with

respect thereto in the service of the corporation as they had in city

service.

20. Subsidiaries; how created. (a) The subsidiary corporation by

resolution may direct any of its members, officers or employees to

organize a subsidiary of the subsidiary corporation whenever, in the

sole discretion of the subsidiary corporation, it has become necessary

to acquire one or more housing accommodations or other real property in

the case of sale under foreclosure or in lieu of foreclosure and it is

beneficial to effectuate the purpose of this chapter for the subsidiary

of the subsidiary corporation to hold title to such housing

accommodations or other real property.

(b) Each such subsidiary of the subsidiary corporation shall be wholly

owned by the subsidiary corporation and shall be organized pursuant to

the business corporation law, the not-for-profit corporation law or

article two or article eleven of this chapter.

(c) The subsidiary corporation may transfer to any subsidiary of the

subsidiary corporation any money, real and/or personal property or may

convey to it any housing accommodation or other real property in order

to carry out the purposes of this article. Each such subsidiary of the

subsidiary corporation shall have all the privileges, immunities, tax

exemptions and other exemptions of the subsidiary corporation to the

extent the same are not inconsistent with the statute or statutes

pursuant to which such subsidiary of the subsidiary corporation was

incorporated. Except as may be inconsistent with the provisions of this

article, such subsidiary, if organized pursuant to article two or

article eleven of this chapter, shall have all the rights and powers

granted to housing companies by this chapter and by any other statute

pursuant to which such subsidiary of the subsidiary corporation was

organized.

(d) No member or officer of the subsidiary corporation shall receive

any additional compensation, either direct or indirect, other than

reimbursement for actual and necessary expenses incurred in the

performance of such person's duties, by reason of such person serving as

a member, director, trustee or officer of any subsidiary of the

subsidiary corporation.