N.Y. Public Authorities Law § 2405: Purchase of existing mortgages

* § 2405. Purchase of existing mortgages. (1) A purpose of the agency

shall be to purchase existing mortgages from banks within the state

during periods when there is an inadequate supply of credit available

for new residential mortgages and to require such banks to invest an

amount equal to the proceeds thereof as rapidly as possible in new

mortgages on residential real property for family units within the

state.

It is hereby found and declared that such activities by the agency

will alleviate a condition of affairs in this state which is contrary to

the public health, safety and general welfare and which has constituted

in the past and from time to time in the future can be expected to

constitute a public emergency. It is further found and declared that

such purposes are in all respects for the benefit of the people of the

state of New York and the agency shall be regarded as performing an

essential governmental function in carrying out its purposes and in

exercising the powers granted by this title.

(2) The agency shall purchase existing mortgages from banks at such

prices and upon such terms and conditions as it shall determine;

provided, however, that the total purchase price for all existing

mortgages which the agency commits to purchase from a bank at any one

time shall in no event be more than the total of the unpaid principal

balances thereof, plus accrued interest thereon.

(3) (a) The agency shall require as a condition of purchase of

existing mortgages from banks that such banks shall, within such period

as may be approved by the agency not in excess of ninety days of receipt

of the purchase price, enter into written commitments to loan and shall,

within such period as may be approved by the agency, loan an amount

equal to the entire purchase price of such existing mortgages on new

mortgages within the state having such terms as the agency may

prescribe.

(b) (i) The proportionate dollar amount of commitments from each

agency issue of bonds or notes used to purchase mortgages from banks in

each region of the state, as such regions are set forth in subdivision

nine of section twenty-four hundred twenty-six of this title shall,

subject to subparagraph (ii) hereof, reflect the proportion that the

number of families in each region bears to the number of families in the

state as a whole.

(ii) To the extent that the reasonable demand by banks in any region

is insufficient to accommodate the proportion of an agency issue of

bonds or notes determined pursuant to subparagraph (i) hereof for such

region, the agency shall use reasonable efforts to purchase mortgages

such that the excess funds from such region are distributed among the

other regions in proportion to the relative reasonable demand. In

determining reasonable demand, the agency shall consider, among other

things, historical demand for mortgages in such regions, the dollar

amount of offers by banks to sell mortgages to the agency and the

reasonableness of such offers, considering the size, mortgage history,

total assets, liquidity and financial ability of the bank to conform to

the contract of sale and the bank's record of compliance with agency

requirements.

(iii) The agency shall use its best efforts to the end that not less

than one-sixth in dollar amount of new mortgages resulting from its

program of purchasing mortgages shall be on newly constructed

residences. A newly constructed residence is defined as a one to four

family dwelling not previously occupied.

(iv) During the time that the agency is accepting offers to sell

mortgages from banks, the agency shall advertise, in newspapers of

general circulation within the state, the fact that it is accepting

offers from banks, and such other information as the agency determines

to be helpful in generating maximum participation by banks and potential

mortgagors. All banks within each such region shall be invited by the

agency to participate in the agency's purchase of mortgages from the

proceeds of the sale of each issue by the agency of its bonds and notes.

The allocation of the proceeds of each such agency issue among the banks

requesting participation within each region shall, to the extent

practicable, maximize the number of banks which participate. Any

commitment between the agency and a bank shall require that the bank

provide the agency with such information, as may be deemed necessary by

the agency, for the agency to assure that the requirements of this title

or any other requirements imposed by the agency with respect to the

purchase of mortgages with the proceeds of any agency issue of bonds or

notes has been fulfilled.

(c) No commitment to loan or loan on a mortgage secured or to be

secured by a multiple dwelling shall satisfy the requirement of

paragraph (a) of this subdivision unless the prior written approval of

such commitment shall have been obtained from the agency. The agency may

refuse to approve any commitment to lend on such a multiple dwelling

mortgage if so required by the terms of any bonding resolution and shall

not approve any commitment to lend on such a multiple dwelling mortgage

if the approval thereof would increase the total dollar amount of such

commitments on multiple dwelling mortgages approved by the agency to an

amount in excess of forty percent of the total purchase price of all

mortgages theretofor purchased by the agency pursuant to this section.

(4) In the case of individual borrowers, new mortgages made by banks

that sell existing mortgages to the agency shall bear interest computed

in accordance with section 5-501 of the general obligations law (whether

or not insured or guaranteed by the United States of America or any

agency thereof) at a rate which does not exceed the maximum interest

rate, if any, set by the agency for such mortgages. The agency may set

such a maximum interest rate chargeable to individual borrowers on such

new mortgages, notwithstanding the maximum interest rate, if any, fixed

by section 5-501 of the general obligations law or any other law not

specifically amending or applicable to this section, at the rate that

the existing mortgages purchased by the agency were discounted to yield

plus an interest differential, not in excess of one percent per annum,

which the agency from time to time shall determine to be adequate

consideration to induce such banks to sell existing mortgages to the

agency and to loan an amount equal to the proceeds on new mortgages in

furtherance of the purposes of and subject to the conditions of this

title. In the case of corporate borrowers, such new mortgages shall bear

interest at a rate not substantially lower than the rate of interest

that banks are charging at the time of commitment on comparable new

mortgages. Each such bank that sells existing mortgages to the agency

shall annually account and pay over to the agency or to the New York

state housing finance agency for deposit in and for the purposes of the

low rent lease account as set forth in paragraphs (a) and (b) of

subdivision four of section forty-four-a of the private housing finance

law or any successor entity as the agency may direct, or to both the

agency and the New York state housing finance agency for such deposit

and purposes in such proportions as the agency may direct, an amount

equal to the difference between (a) the total amount of interest (which

shall include all charges to individual and corporate borrowers that

would be treated as interest under section 5-501 of the general

obligations law and any regulations of the superintendent of financial

services pursuant to section fourteen-a of the banking law) received by

it during the preceding year on all such new mortgages and (b) the total

amount of interest which such new mortgages would have yielded if the

interest thereon had been at the maximum rate chargeable to individual

borrowers on such new mortgages plus an additional interest

differential, not in excess of one percent per annum, determined by the

agency to be adequate consideration to induce participating banks to

make new loans on multiple dwellings.

(5) The agency shall require the submission to it by each bank from

which the agency has purchased existing mortgages evidence satisfactory

to the agency of the making of new mortgage loans and of paying over to

the low rent lease account as required by this section and in connection

therewith may, through its employees or agents or those of the

department of financial services, inspect the books and records of any

such bank.

(6) Compliance by any bank with the terms of its agreement with or

undertaking to the agency with respect to the making of any new

mortgages in connection with the sale of existing mortgages and of

paying over to the low rent lease account may be enforced by decree of

the supreme court. The agency may require as a condition of purchase of

existing mortgages from any national banking association the consent of

such association to the jurisdiction of the supreme court over any such

proceeding. The agency may also require agreement by any bank, as a

condition of the agency's purchase of existing mortgages from such bank,

to the payment of penalties to the agency for violation by the bank of

its undertakings to the agency, and such penalties shall be recoverable

at the suit of the agency.

(7) The agency shall require as a condition of purchase of any

existing mortgage from a bank that the bank represent and warrant to the

agency that

(a) the unpaid principal balance of the mortgage and the interest rate

thereon have been accurately stated to the agency;

(b) the amount of the unpaid principal balance is justly due and

owing;

(c) the bank has no notice of the existence of any counterclaim,

offset or defense asserted by the mortgagor or any successor in

interest;

(d) the mortgage is evidenced by a bond or promissory note and a

mortgage document which has been properly recorded with the appropriate

public official;

(e) the mortgage constitutes a valid first lien or second lien on the

real property described to the agency in accordance with subdivision

five of section twenty-four hundred two of this part subject only to

real property taxes not yet due, installments of assessments not yet

due, and easements and restrictions of record which do not adversely

affect, to a material degree, the use or value of the real property or

improvements thereon;

(f) the mortgage when made was lawful under the banking law or federal

law, whichever governs the affairs of the bank, and would be lawful on

the date of purchase by the agency if made by the bank on that date in

the amount of the then unpaid principal balance;

(g) the mortgagor is not now in default in the payment of any

installment of principal or interest, escrow funds, real property taxes

or otherwise in the performance of his obligations under the mortgage

documents and has not to the knowledge of the bank been in default in

the performance of any such obligation for a period of longer than sixty

days during the life of the mortgage; and

(h) the improvements to the mortgaged real property are covered by a

valid and subsisting policy of insurance issued by a company authorized

by the superintendent of financial services to issue such policies in

the state of New York and providing fire and extended coverage to an

amount not less than eighty percent of the insurable value of the

improvements to the mortgaged real property.

(8) Each bank shall be liable to the agency for any damages suffered

by the agency by reason of the untruth of any representation or the

breach of any warranty and, in the event that any representation shall

prove to be untrue when made or in the event of any breach of warranty,

the bank shall, at the option of the agency, repurchase the existing

mortgage for the original purchase price adjusted for amounts

subsequently paid thereon, as the agency may determine.

(9) The agency need not require the recording of an assignment of any

existing mortgage purchased by it from a bank pursuant to this section

and shall not be required to notify the mortgagor of its purchase of the

mortgage. The agency shall not be required to inspect or take possession

of the mortgage documents if the bank from which the existing mortgage

is purchased by the agency shall enter a contract to service such

mortgage and account to the agency therefor.

(10) Notwithstanding any other provision of law, the agency is

authorized to require, as a condition to the purchase from banks of

existing mortgages, such restrictions upon assumability of each new

mortgage as the agency may determine to be necessary or desirable to

assure the exemption from federal income taxes of the interest payable

on its bonds and notes. Such restrictions shall be enforceable by the

originating bank, the agency, and any successor holder of the mortgage

unless expressly waived in writing by or on behalf of the agency.

(11) The agency shall maintain a continuous review of the availability

of funds in regular banking channels for mortgages. Except as stated

herein with respect to forward commitment mortgages and housing loans,

in the event that the agency shall determine that an adequate supply of

funds exists in regular banking channels for mortgages the agency shall

not authorize the issuance of bonds for the purchase of mortgages except

refunding bonds, until such time as the agency shall determine that the

supply of funds available for mortgages is again inadequate. The agency

shall notify the governor, the temporary president of the senate, and

the speaker of the assembly of any determination that there is an

inadequate supply of funds available for mortgages made by it under this

subdivision. Discontinuance by the agency of the purchase of mortgages

pursuant to a determination that an adequate supply of funds exists in

regular banking channels shall not constitute, or in any way effect,

termination of the agency as provided in subdivision six of section two

thousand four hundred three of this title. Notwithstanding the

foregoing, the agency may issue bonds or notes for the purpose of

furthering forward commitment mortgage programs described in section

twenty-four hundred five-b of this title and housing loan programs

described in section twenty-four hundred five-c of this title if the

agency shall determine that such programs will increase the supply of

credit available for new residential mortgages and new residential

improvement loans at carrying charges within the financial means of

persons and families of low or moderate income.

* NB Effective until July 23, 2027

* § 2405. Purchase of mortgages. (1) The purpose of the agency shall

be to purchase mortgages from banks within the state during periods when

there is an inadequate supply of credit available for new residential

mortgage loans and to require such banks to invest an amount equal to

the proceeds thereof as rapidly as possible in new mortgages on

residential real property for family units within the state.

It is hereby found and declared that such activities by the agency

will alleviate a condition of affairs in this state which is contrary to

the public health, safety and general welfare and which has constituted

in the past and from time to time in the future can be expected to

constitute a public emergency. It is further found and declared that

such purposes are in all respects for the benefit of the people of the

state of New York and the agency shall be regarded as performing an

essential governmental function in carrying out its purposes and in

exercising the powers granted by this title.

(2) The agency shall purchase mortgages from banks at such prices and

upon such terms and conditions as it shall determine; provided, however,

that the total purchase price for all mortgages which the agency commits

to purchase from a bank at any one time shall in no event be more than

the total of the unpaid principal balances thereof.

(3) (a) The agency shall require as a condition of purchase of

mortgages from banks that such banks shall, within such period as may be

approved by the agency not in excess of ninety days of receipt of the

purchase price, enter into written commitments to loan and shall, within

such period as may be approved by the agency, loan an amount equal to

the entire purchase price of such mortgages on new mortgages within the

state having such terms as the agency may prescribe.

(b) (i) The proportionate dollar amount of commitments from each

agency issue of bonds or notes used to purchase mortgages from banks in

each region of the state, as such regions are set forth in subdivision

nine of section twenty-four hundred twenty-six of this title shall,

subject to subparagraph (ii) hereof, reflect the proportion that the

number of families in each region bears to the number of families in the

state as a whole.

(ii) To the extent that the reasonable demand by banks in any region

is insufficient to accommodate the proportion of an agency issue of

bonds or notes determined pursuant to subparagraph (i) hereof for such

region, the agency shall use reasonable efforts to purchase mortgages

such that the excess funds from such region are distributed among the

other regions in proportion to the relative reasonable demand. In

determining reasonable demand, the agency shall consider, among other

things, historical demand for mortgages in such regions, the dollar

amount of offers by banks to sell mortgages to the agency and the

reasonableness of such offers, considering the size, mortgage history,

total assets, liquidity and financial ability of the bank to conform to

the contract of sale and the bank's record of compliance with agency

requirements.

(iii) The agency shall use its best efforts to the end that not less

than one-sixth in dollar amount of new mortgages resulting from its

program of purchasing mortgages shall be on newly constructed

residences. A newly constructed residence is defined as a one to four

family dwelling not previously occupied.

(iv) During the time that the agency is accepting offers to sell

mortgages from banks, the agency shall advertise, in newspapers of

general circulation within the state, the fact that it is accepting

offers from banks, and such other information as the agency determines

to be helpful in generating maximum participation by banks and potential

mortgagors. All banks within each such region shall be invited by the

agency to participate in the agency's purchase of mortgages from the

proceeds of the sale of each issue by the agency of its bonds and notes.

The allocation of the proceeds of each such agency issue among the banks

requesting participation within each region shall, to the extent

practicable, maximize the number of banks which participate. Any

commitment between the agency and a bank shall require that the bank

provide the agency with such information, as may be deemed necessary by

the agency, for the agency to assure that the requirements of this title

or any other requirements imposed by the agency with respect to the

purchase of mortgages with the proceeds of any agency issue of bonds or

notes has been fulfilled.

(c) No commitment to loan or loan on a mortgage secured or to be

secured by a multiple dwelling shall satisfy the requirement of

paragraph (a) of this subdivision unless the prior written approval of

such commitment shall have been obtained from the agency. The agency may

refuse to approve any commitment to lend on such a multiple dwelling

mortgage if so required by the terms of any bonding resolution and shall

not approve any commitment to lend on such a multiple dwelling mortgage

if the approval thereof would increase the total dollar amount of such

commitments on multiple dwelling mortgages approved by the agency to an

amount in excess of forty percent of the total purchase price of all

mortgages theretofor purchased by the agency pursuant to this section.

(4) In the case of individual borrowers, such new mortgages shall bear

interest computed in accordance with section 5-501 of the general

obligations law (whether or not insured or guaranteed by the United

States of America or any agency thereof) at a rate which does not exceed

the maximum interest rate, if any, set by the agency for such mortgages.

The agency may set such a maximum interest rate chargeable individual

borrowers on such new loans, notwithstanding the maximum interest rate

fixed by section 5-501 of the general obligations law, at the rate that

the mortgages purchased by the agency were discounted to yield plus an

interest differential, not in excess of one percent per annum, which the

agency from time to time shall determine to be adequate consideration to

induce such banks to sell existing mortgages to the agency and to loan

an amount equal to the proceeds on new mortgages in furtherance of the

purposes of and subject to the conditions of this title. In the case of

corporate borrowers, such new mortgages shall bear interest at a rate

not substantially lower than the rate of interest that banks are

charging at the time of commitment on comparable new mortgage loans.

Each such bank shall annually account and pay over to the agency or to

the New York state housing finance agency for deposit in and for the

purposes of the low rent lease account as set forth in paragraphs (a)

and (b) of subdivision four of section forty-four-a of the private

housing finance law or any successor entity as the agency may direct, or

to both the agency and the New York state housing finance agency for

such deposit and purposes in such proportions as the agency may direct,

an amount equal to the difference between (a) the total amount of

interest (which shall include all charges to individual and corporate

borrowers that would be treated as interest under section 5-501 of the

general obligations law and any regulations of the superintendent of

financial services pursuant to section fourteen-a of the banking law)

received by it during the preceding year on all such new mortgages and

(b) the total amount of interest which such mortgages would have yielded

if the interest thereon had been at the maximum rate chargeable

individual borrowers on such new loans plus an additional interest

differential, not in excess of one percent per annum, determined by the

agency to be adequate consideration to induce participating banks to

make new loans on multiple dwellings.

(5) The agency shall require the submission to it by each bank from

which the agency has purchased mortgages evidence satisfactory to the

agency of the making of new mortgage loans and of paying over to the low

rent lease account as required by this section and in connection

therewith may, through its employees or agents or those of the

department of financial services, inspect the books and records of any

such bank.

(6) Compliance by any bank with the terms of its agreement with or

undertaking to the agency with respect to the making of any mortgage

loans and of paying over to the low rent lease account may be enforced

by decree of the supreme court. The agency may require as a condition of

purchase of mortgages from any national banking association the consent

of such association to the jurisdiction of the supreme court over any

such proceeding. The agency may also require agreement by any bank, as a

condition of the agency's purchase of mortgages from such bank, to the

payment of penalties to the agency for violation by the bank of its

undertakings to the agency, and such penalties shall be recoverable at

the suit of the agency.

(7) The agency shall require as a condition of purchase of any

mortgage from a bank that the bank represent and warrant to the agency

that

(a) the unpaid principal balance of the mortgage and the interest rate

thereon have been accurately stated to the agency;

(b) the amount of the unpaid principal balance is justly due and

owing;

(c) the bank has no notice of the existence of any counterclaim,

offset or defense asserted by the mortgagor or his successor in

interest;

(d) the mortgage is evidenced by a bond or promissory note and a

mortgage document which has been properly recorded with the appropriate

public official;

(e) the mortgage constitutes a valid first lien or second lien on the

real property described to the agency in accordance with subdivision

five of section twenty-four hundred two of this part subject only to

real property taxes not yet due, installments of assessments not yet

due, and easements and restrictions of record which do not adversely

affect, to a material degree, the use or value of the real property or

improvements thereon;

(f) the mortgage loan when made was lawful under the banking law or

federal law, whichever governs the affairs of the bank, and would be

lawful on the date of purchase by the agency if made by the bank on that

date in the amount of the then unpaid principal balance;

(g) the mortgagor is not now in default in the payment of any

installment of principal or interest, escrow funds, real property taxes

or otherwise in the performance of his obligations under the mortgage

documents and has not to the knowledge of the bank been in default in

the performance of any such obligation for a period of longer than sixty

days during the life of the mortgage, and

(h) the improvements to the mortgaged real property are covered by a

valid and subsisting policy of insurance issued by a company authorized

by the superintendent of financial services to issue such policies in

the state of New York and providing fire and extended coverage to an

amount not less than eighty percent of the insurable value of the

improvements to the mortgaged real property.

(8) Each bank shall be liable to the agency for any damages suffered

by the agency by reason of the untruth of any representation or the

breach of any warranty and, in the event that any representation shall

prove to be untrue when made or in the event of any breach of warranty,

the bank shall, at the option of the agency, repurchase the mortgage for

the original purchase price adjusted for amounts subsequently paid

thereon, as the agency may determine.

(9) The agency need not require the recording of an assignment of any

mortgage purchased by it from a bank pursuant to this section and shall

not be required to notify the mortgagor of its purchase of the mortgage.

The agency shall not be required to inspect or take possession of the

mortgage documents if the bank from which the mortgage is purchased by

the agency shall enter a contract to service such mortgage and account

to the agency therefor.

(10) The agency shall maintain a continuous review of the availability

of funds in regular banking channels for new mortgage loans. In the

event that the agency shall determine that an adequate supply of funds

exists in regular banking channels for new mortgage loans the agency

shall not authorize the issuance of bonds for the purchase of mortgages

except refunding bonds, until such time as the agency shall determine

that the supply of funds available for mortgages is again inadequate.

The agency shall notify the governor, the temporary president of the

senate, and the speaker of the assembly of any determination that there

is an inadequate supply of funds available for mortgages made by it

under this subdivision. Discontinuance by the agency of the purchase of

mortgages pursuant to a determination that an adequate supply of funds

exists in regular banking channels shall not constitute, or in any way

effect, termination of the agency as provided in subdivision six of

section two thousand four hundred three of this title.

* NB Effective July 23, 2027