N.Y. Private Housing Finance Law § 802: Participation loans to owners

§ 802. Participation loans to owners. 1. (a) Notwithstanding the

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

investors and a municipality, acting through its agency, shall have the

power to participate and invest in making loans to the owners of

existing multiple dwellings or to the owners of non-residential property

or to the owners of vacant land subject to the limitations of

subdivisions two through seven of this section, in such amounts as shall

be required for (i) the rehabilitation of such existing multiple

dwellings or for the conversion of such non-residential property or for

the construction of new multiple dwellings on such vacant land, provided

that such rehabilitation, conversion or construction may include climate

resiliency improvements, and if any such owner acquires the existing

multiple dwelling or the non-residential property or the vacant land for

the purpose of such rehabilitation, conversion or construction or owns

the existing multiple dwelling or the non-residential property or the

vacant land subject to an outstanding indebtedness, such loans may be

made exclusively for or may include such amounts as may be required for

the cost of such acquisition or for the refinancing of such outstanding

indebtedness, (ii) providing site improvements located on the property

on which such existing multiple dwellings are located or on such

non-residential property or vacant land or in a public right-of-way,

incidental or appurtenant to such rehabilitation, conversion or

construction, including, but not limited to, water and sewer facilities,

sidewalks, landscaping, parks and open space, social, recreational,

communal and other non-residential facilities and the outfitting

thereof, the curing of problems caused by abnormal site conditions,

excavation and construction of footings and foundations and other

improvements associated with the provision of infrastructure for housing

accommodations, or (iii) providing for other costs of developing housing

accommodations, and such private investors and a municipality may

jointly participate or invest in the making of temporary loans or

advances to such owners in anticipation of the permanent participation

loans for such purposes.

(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

municipality, acting through its agency, and the New York city housing

development corporation shall each 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 investor, on the same

terms as permitted under such paragraph for a participation loan.

2. A municipality may utilize federal grant funds or state grant funds

or any municipal funds to finance its participation or investment in a

loan pursuant to this article. This subdivision shall not apply to any

participation in a loan by the New York city housing development

corporation pursuant to section eight hundred five of this article.

3. Each participation loan shall be secured by a bond or note and

single participating mortgage or by separate bonds or notes and

mortgages upon the existing multiple dwelling or the non-residential

property and the land upon which it is situated or, in the case of the

construction of a new multiple dwelling, upon the vacant land and the

multiple dwelling to be constructed, or, in the case of a multiple

dwelling held in the condominium form of ownership, a note and mortgage

upon the condominium units rehabilitated with such participation loan,

provided that a participation loan to an owner who is a lessee shall be

secured by a leasehold interest in such property, and provided, further,

that each such loan shall be made upon such terms and conditions as may

be approved by the agency, including but not limited to, provisions that

(a) priority may be given to the payment of the principal of and

interest on that portion of the mortgage indebtedness attributable to

participation in the loan by one or more private investors, (b) the

interest of the municipality created as a result of making such a

mortgage loan may be subordinated to the interest that one or more of

such private investors may have upon such participation, (c) the

interest of each upon such participation need not be of equal priority

as to lien nor be equal as to interest rate, time or rate of

amortization of principal or time of payment of interest, or otherwise,

(d) the bond or note and mortgage may provide that the municipality's

portion of a participation loan made to an owner shall be reduced to

zero commencing in the fifteenth year after the execution of the bond or

note and mortgage, provided that, as of the date of any such reduction,

such multiple dwelling has been and continues to be owned and operated

in a manner consistent with a regulatory agreement with the

municipality. Notwithstanding such provision as contained in the bond or

note and mortgage, the municipality's portion of the loan shall be

reduced to zero only if, prior to or simultaneously with delivery of

such bond or note and mortgage, the agency made a written determination

that such reduction would be necessary to ensure the continued

affordability or economic viability of the multiple dwelling. Such

written determination shall document the basis upon which the loan was

determined to be eligible for evaporation.

4. Each such bond or note and mortgage or bonds or notes and mortgages

shall be repaid over or within a period of forty years, provided that

such period may be extended as the agency may determine necessary to

ensure the continued affordability or economic viability of the multiple

dwelling, in such manner as may be provided in such bond or note and

mortgage or bonds or notes and mortgages. Such bond or note and mortgage

or bonds or notes and mortgages and any contract in connection with such

permanent and temporary loans may contain such other terms and

provisions not inconsistent with the provisions of this article as the

local legislative body or the agency may deem necessary or desirable to

secure repayment of the loan, the interest thereon and other charges in

connection therewith and to carry out the purposes and provisions of

this article.

5. The bond or note or the bonds or notes issued by the owner and the

mortgage or mortgages relating thereto may authorize such owner, with

the consent of the agency and the private investor, to prepay the

principal of the loan subject to such terms and conditions as therein

provided. Such bond or note and mortgage or bonds or notes and mortgages

may contain such other clauses and provisions as the agency shall

require.

6. Where a municipality joins with one or more private investors in

making a participation loan secured by a single participating mortgage

or by separate mortgages, the agency may make provision, either in the

mortgage or mortgages or by separate agreement, for the performances of

such services as are generally performed by a banking institution or

insurance company which itself owns and holds a mortgage or by a trustee

under a trust mortgage and for the imposition of reasonable fees for

financing, regulation, supervision and audit of such multiple dwelling.

The agency is hereby authorized to act as trustee or to consent to the

appointment of a banking institution or any subsidiary thereof to act in

such capacity and to provide such services as are generally performed by

any such bank itself or its subsidiary owning and holding such a

mortgage.

7. Banking organizations and insurance companies may exercise such

power only to the extent and on such conditions as may be authorized by

the state superintendent of financial services.

8. Notwithstanding the provisions of any other law, a savings bank may

invest to an amount not exceeding ninety per centum of the value of any

real property when jointly participating or investing in a loan pursuant

to the provisions of this article or not exceeding ninety-five per

centum of the value of any real property when jointly participating or

investing in a loan pursuant to the provisions of article fourteen of

this chapter.