§ 2405 — Purchase of existing mortgages

* § 2405. Purchase of existing mortgages. (1) A purpose of the agency\nshall be to purchase existing mortgages from banks within the state\nduring periods when there is an inadequate supply of credit available\nfor new residential mortgages and to require such banks to invest an\namount equal to the proceeds thereof as rapidly as possible in new\nmortgages on residential real property for family units within the\nstate.\n It is hereby found and declared that such activities by the agency\nwill alleviate a condition of affairs in this state which is contrary to\nthe public health, safety and general welfare and which has constituted\nin the past and from time to time in the future can be expected to\nconstitute a public emergency. It is further found and declared that\nsuch purposes are in all respects for the benefit of the people of the\nstate of New York and the agency shall be regarded as performing an\nessential governmental function in carrying out its purposes and in\nexercising the powers granted by this title.\n (2) The agency shall purchase existing mortgages from banks at such\nprices and upon such terms and conditions as it shall determine;\nprovided, however, that the total purchase price for all existing\nmortgages which the agency commits to purchase from a bank at any one\ntime shall in no event be more than the total of the unpaid principal\nbalances thereof, plus accrued interest thereon.\n (3) (a) The agency shall require as a condition of purchase of\nexisting mortgages from banks that such banks shall, within such period\nas may be approved by the agency not in excess of ninety days of receipt\nof the purchase price, enter into written commitments to loan and shall,\nwithin such period as may be approved by the agency, loan an amount\nequal to the entire purchase price of such existing mortgages on new\nmortgages within the state having such terms as the agency may\nprescribe.\n (b) (i) The proportionate dollar amount of commitments from each\nagency issue of bonds or notes used to purchase mortgages from banks in\neach region of the state, as such regions are set forth in subdivision\nnine of section twenty-four hundred twenty-six of this title shall,\nsubject to subparagraph (ii) hereof, reflect the proportion that the\nnumber of families in each region bears to the number of families in the\nstate as a whole.\n (ii) To the extent that the reasonable demand by banks in any region\nis insufficient to accommodate the proportion of an agency issue of\nbonds or notes determined pursuant to subparagraph (i) hereof for such\nregion, the agency shall use reasonable efforts to purchase mortgages\nsuch that the excess funds from such region are distributed among the\nother regions in proportion to the relative reasonable demand. In\ndetermining reasonable demand, the agency shall consider, among other\nthings, historical demand for mortgages in such regions, the dollar\namount of offers by banks to sell mortgages to the agency and the\nreasonableness of such offers, considering the size, mortgage history,\ntotal assets, liquidity and financial ability of the bank to conform to\nthe contract of sale and the bank's record of compliance with agency\nrequirements.\n (iii) The agency shall use its best efforts to the end that not less\nthan one-sixth in dollar amount of new mortgages resulting from its\nprogram of purchasing mortgages shall be on newly constructed\nresidences. A newly constructed residence is defined as a one to four\nfamily dwelling not previously occupied.\n (iv) During the time that the agency is accepting offers to sell\nmortgages from banks, the agency shall advertise, in newspapers of\ngeneral circulation within the state, the fact that it is accepting\noffers from banks, and such other information as the agency determines\nto be helpful in generating maximum participation by banks and potential\nmortgagors. All banks within each such region shall be invited by the\nagency to participate in the agency's purchase of mortgages from the\nproceeds of the sale of each issue by the agency of its bonds and notes.\nThe allocation of the proceeds of each such agency issue among the banks\nrequesting participation within each region shall, to the extent\npracticable, maximize the number of banks which participate. Any\ncommitment between the agency and a bank shall require that the bank\nprovide the agency with such information, as may be deemed necessary by\nthe agency, for the agency to assure that the requirements of this title\nor any other requirements imposed by the agency with respect to the\npurchase of mortgages with the proceeds of any agency issue of bonds or\nnotes has been fulfilled.\n (c) No commitment to loan or loan on a mortgage secured or to be\nsecured by a multiple dwelling shall satisfy the requirement of\nparagraph (a) of this subdivision unless the prior written approval of\nsuch commitment shall have been obtained from the agency. The agency may\nrefuse to approve any commitment to lend on such a multiple dwelling\nmortgage if so required by the terms of any bonding resolution and shall\nnot approve any commitment to lend on such a multiple dwelling mortgage\nif the approval thereof would increase the total dollar amount of such\ncommitments on multiple dwelling mortgages approved by the agency to an\namount in excess of forty percent of the total purchase price of all\nmortgages theretofor purchased by the agency pursuant to this section.\n (4) In the case of individual borrowers, new mortgages made by banks\nthat sell existing mortgages to the agency shall bear interest computed\nin accordance with section 5-501 of the general obligations law (whether\nor not insured or guaranteed by the United States of America or any\nagency thereof) at a rate which does not exceed the maximum interest\nrate, if any, set by the agency for such mortgages. The agency may set\nsuch a maximum interest rate chargeable to individual borrowers on such\nnew mortgages, notwithstanding the maximum interest rate, if any, fixed\nby section 5-501 of the general obligations law or any other law not\nspecifically amending or applicable to this section, at the rate that\nthe existing mortgages purchased by the agency were discounted to yield\nplus an interest differential, not in excess of one percent per annum,\nwhich the agency from time to time shall determine to be adequate\nconsideration to induce such banks to sell existing mortgages to the\nagency and to loan an amount equal to the proceeds on new mortgages in\nfurtherance of the purposes of and subject to the conditions of this\ntitle. In the case of corporate borrowers, such new mortgages shall bear\ninterest at a rate not substantially lower than the rate of interest\nthat banks are charging at the time of commitment on comparable new\nmortgages. Each such bank that sells existing mortgages to the agency\nshall annually account and pay over to the agency or to the New York\nstate housing finance agency for deposit in and for the purposes of the\nlow rent lease account as set forth in paragraphs (a) and (b) of\nsubdivision four of section forty-four-a of the private housing finance\nlaw or any successor entity as the agency may direct, or to both the\nagency and the New York state housing finance agency for such deposit\nand purposes in such proportions as the agency may direct, an amount\nequal to the difference between (a) the total amount of interest (which\nshall include all charges to individual and corporate borrowers that\nwould be treated as interest under section 5-501 of the general\nobligations law and any regulations of the superintendent of financial\nservices pursuant to section fourteen-a of the banking law) received by\nit during the preceding year on all such new mortgages and (b) the total\namount of interest which such new mortgages would have yielded if the\ninterest thereon had been at the maximum rate chargeable to individual\nborrowers on such new mortgages plus an additional interest\ndifferential, not in excess of one percent per annum, determined by the\nagency to be adequate consideration to induce participating banks to\nmake new loans on multiple dwellings.\n (5) The agency shall require the submission to it by each bank from\nwhich the agency has purchased existing mortgages evidence satisfactory\nto the agency of the making of new mortgage loans and of paying over to\nthe low rent lease account as required by this section and in connection\ntherewith may, through its employees or agents or those of the\ndepartment of financial services, inspect the books and records of any\nsuch bank.\n (6) Compliance by any bank with the terms of its agreement with or\nundertaking to the agency with respect to the making of any new\nmortgages in connection with the sale of existing mortgages and of\npaying over to the low rent lease account may be enforced by decree of\nthe supreme court. The agency may require as a condition of purchase of\nexisting mortgages from any national banking association the consent of\nsuch association to the jurisdiction of the supreme court over any such\nproceeding. The agency may also require agreement by any bank, as a\ncondition of the agency's purchase of existing mortgages from such bank,\nto the payment of penalties to the agency for violation by the bank of\nits undertakings to the agency, and such penalties shall be recoverable\nat the suit of the agency.\n (7) The agency shall require as a condition of purchase of any\nexisting mortgage from a bank that the bank represent and warrant to the\nagency that\n (a) the unpaid principal balance of the mortgage and the interest rate\nthereon have been accurately stated to the agency;\n (b) the amount of the unpaid principal balance is justly due and\nowing;\n (c) the bank has no notice of the existence of any counterclaim,\noffset or defense asserted by the mortgagor or any successor in\ninterest;\n (d) the mortgage is evidenced by a bond or promissory note and a\nmortgage document which has been properly recorded with the appropriate\npublic official;\n (e) the mortgage constitutes a valid first lien or second lien on the\nreal property described to the agency in accordance with subdivision\nfive of section twenty-four hundred two of this part subject only to\nreal property taxes not yet due, installments of assessments not yet\ndue, and easements and restrictions of record which do not adversely\naffect, to a material degree, the use or value of the real property or\nimprovements thereon;\n (f) the mortgage when made was lawful under the banking law or federal\nlaw, whichever governs the affairs of the bank, and would be lawful on\nthe date of purchase by the agency if made by the bank on that date in\nthe amount of the then unpaid principal balance;\n (g) the mortgagor is not now in default in the payment of any\ninstallment of principal or interest, escrow funds, real property taxes\nor otherwise in the performance of his obligations under the mortgage\ndocuments and has not to the knowledge of the bank been in default in\nthe performance of any such obligation for a period of longer than sixty\ndays during the life of the mortgage; and\n (h) the improvements to the mortgaged real property are covered by a\nvalid and subsisting policy of insurance issued by a company authorized\nby the superintendent of financial services to issue such policies in\nthe state of New York and providing fire and extended coverage to an\namount not less than eighty percent of the insurable value of the\nimprovements to the mortgaged real property.\n (8) Each bank shall be liable to the agency for any damages suffered\nby the agency by reason of the untruth of any representation or the\nbreach of any warranty and, in the event that any representation shall\nprove to be untrue when made or in the event of any breach of warranty,\nthe bank shall, at the option of the agency, repurchase the existing\nmortgage for the original purchase price adjusted for amounts\nsubsequently paid thereon, as the agency may determine.\n (9) The agency need not require the recording of an assignment of any\nexisting mortgage purchased by it from a bank pursuant to this section\nand shall not be required to notify the mortgagor of its purchase of the\nmortgage. The agency shall not be required to inspect or take possession\nof the mortgage documents if the bank from which the existing mortgage\nis purchased by the agency shall enter a contract to service such\nmortgage and account to the agency therefor.\n (10) Notwithstanding any other provision of law, the agency is\nauthorized to require, as a condition to the purchase from banks of\nexisting mortgages, such restrictions upon assumability of each new\nmortgage as the agency may determine to be necessary or desirable to\nassure the exemption from federal income taxes of the interest payable\non its bonds and notes. Such restrictions shall be enforceable by the\noriginating bank, the agency, and any successor holder of the mortgage\nunless expressly waived in writing by or on behalf of the agency.\n (11) The agency shall maintain a continuous review of the availability\nof funds in regular banking channels for mortgages. Except as stated\nherein with respect to forward commitment mortgages and housing loans,\nin the event that the agency shall determine that an adequate supply of\nfunds exists in regular banking channels for mortgages the agency shall\nnot authorize the issuance of bonds for the purchase of mortgages except\nrefunding bonds, until such time as the agency shall determine that the\nsupply of funds available for mortgages is again inadequate. The agency\nshall notify the governor, the temporary president of the senate, and\nthe speaker of the assembly of any determination that there is an\ninadequate supply of funds available for mortgages made by it under this\nsubdivision. Discontinuance by the agency of the purchase of mortgages\npursuant to a determination that an adequate supply of funds exists in\nregular banking channels shall not constitute, or in any way effect,\ntermination of the agency as provided in subdivision six of section two\nthousand four hundred three of this title. Notwithstanding the\nforegoing, the agency may issue bonds or notes for the purpose of\nfurthering forward commitment mortgage programs described in section\ntwenty-four hundred five-b of this title and housing loan programs\ndescribed in section twenty-four hundred five-c of this title if the\nagency shall determine that such programs will increase the supply of\ncredit available for new residential mortgages and new residential\nimprovement loans at carrying charges within the financial means of\npersons and families of low or moderate income.\n * NB Effective until July 23, 2027\n * § 2405. Purchase of mortgages. (1) The purpose of the agency shall\nbe to purchase mortgages from banks within the state during periods when\nthere is an inadequate supply of credit available for new residential\nmortgage loans and to require such banks to invest an amount equal to\nthe proceeds thereof as rapidly as possible in new mortgages on\nresidential real property for family units within the state.\n It is hereby found and declared that such activities by the agency\nwill alleviate a condition of affairs in this state which is contrary to\nthe public health, safety and general welfare and which has constituted\nin the past and from time to time in the future can be expected to\nconstitute a public emergency. It is further found and declared that\nsuch purposes are in all respects for the benefit of the people of the\nstate of New York and the agency shall be regarded as performing an\nessential governmental function in carrying out its purposes and in\nexercising the powers granted by this title.\n (2) The agency shall purchase mortgages from banks at such prices and\nupon such terms and conditions as it shall determine; provided, however,\nthat the total purchase price for all mortgages which the agency commits\nto purchase from a bank at any one time shall in no event be more than\nthe total of the unpaid principal balances thereof.\n (3) (a) The agency shall require as a condition of purchase of\nmortgages from banks that such banks shall, within such period as may be\napproved by the agency not in excess of ninety days of receipt of the\npurchase price, enter into written commitments to loan and shall, within\nsuch period as may be approved by the agency, loan an amount equal to\nthe entire purchase price of such mortgages on new mortgages within the\nstate having such terms as the agency may prescribe.\n (b) (i) The proportionate dollar amount of commitments from each\nagency issue of bonds or notes used to purchase mortgages from banks in\neach region of the state, as such regions are set forth in subdivision\nnine of section twenty-four hundred twenty-six of this title shall,\nsubject to subparagraph (ii) hereof, reflect the proportion that the\nnumber of families in each region bears to the number of families in the\nstate as a whole.\n (ii) To the extent that the reasonable demand by banks in any region\nis insufficient to accommodate the proportion of an agency issue of\nbonds or notes determined pursuant to subparagraph (i) hereof for such\nregion, the agency shall use reasonable efforts to purchase mortgages\nsuch that the excess funds from such region are distributed among the\nother regions in proportion to the relative reasonable demand. In\ndetermining reasonable demand, the agency shall consider, among other\nthings, historical demand for mortgages in such regions, the dollar\namount of offers by banks to sell mortgages to the agency and the\nreasonableness of such offers, considering the size, mortgage history,\ntotal assets, liquidity and financial ability of the bank to conform to\nthe contract of sale and the bank's record of compliance with agency\nrequirements.\n (iii) The agency shall use its best efforts to the end that not less\nthan one-sixth in dollar amount of new mortgages resulting from its\nprogram of purchasing mortgages shall be on newly constructed\nresidences. A newly constructed residence is defined as a one to four\nfamily dwelling not previously occupied.\n (iv) During the time that the agency is accepting offers to sell\nmortgages from banks, the agency shall advertise, in newspapers of\ngeneral circulation within the state, the fact that it is accepting\noffers from banks, and such other information as the agency determines\nto be helpful in generating maximum participation by banks and potential\nmortgagors. All banks within each such region shall be invited by the\nagency to participate in the agency's purchase of mortgages from the\nproceeds of the sale of each issue by the agency of its bonds and notes.\nThe allocation of the proceeds of each such agency issue among the banks\nrequesting participation within each region shall, to the extent\npracticable, maximize the number of banks which participate. Any\ncommitment between the agency and a bank shall require that the bank\nprovide the agency with such information, as may be deemed necessary by\nthe agency, for the agency to assure that the requirements of this title\nor any other requirements imposed by the agency with respect to the\npurchase of mortgages with the proceeds of any agency issue of bonds or\nnotes has been fulfilled.\n (c) No commitment to loan or loan on a mortgage secured or to be\nsecured by a multiple dwelling shall satisfy the requirement of\nparagraph (a) of this subdivision unless the prior written approval of\nsuch commitment shall have been obtained from the agency. The agency may\nrefuse to approve any commitment to lend on such a multiple dwelling\nmortgage if so required by the terms of any bonding resolution and shall\nnot approve any commitment to lend on such a multiple dwelling mortgage\nif the approval thereof would increase the total dollar amount of such\ncommitments on multiple dwelling mortgages approved by the agency to an\namount in excess of forty percent of the total purchase price of all\nmortgages theretofor purchased by the agency pursuant to this section.\n (4) In the case of individual borrowers, such new mortgages shall bear\ninterest computed in accordance with section 5-501 of the general\nobligations law (whether or not insured or guaranteed by the United\nStates of America or any agency thereof) at a rate which does not exceed\nthe maximum interest rate, if any, set by the agency for such mortgages.\nThe agency may set such a maximum interest rate chargeable individual\nborrowers on such new loans, notwithstanding the maximum interest rate\nfixed by section 5-501 of the general obligations law, at the rate that\nthe mortgages purchased by the agency were discounted to yield plus an\ninterest differential, not in excess of one percent per annum, which the\nagency from time to time shall determine to be adequate consideration to\ninduce such banks to sell existing mortgages to the agency and to loan\nan amount equal to the proceeds on new mortgages in furtherance of the\npurposes of and subject to the conditions of this title. In the case of\ncorporate borrowers, such new mortgages shall bear interest at a rate\nnot substantially lower than the rate of interest that banks are\ncharging at the time of commitment on comparable new mortgage loans.\nEach such bank shall annually account and pay over to the agency or to\nthe New York state housing finance agency for deposit in and for the\npurposes of the low rent lease account as set forth in paragraphs (a)\nand (b) of subdivision four of section forty-four-a of the private\nhousing finance law or any successor entity as the agency may direct, or\nto both the agency and the New York state housing finance agency for\nsuch deposit and purposes in such proportions as the agency may direct,\nan amount equal to the difference between (a) the total amount of\ninterest (which shall include all charges to individual and corporate\nborrowers that would be treated as interest under section 5-501 of the\ngeneral obligations law and any regulations of the superintendent of\nfinancial services pursuant to section fourteen-a of the banking law)\nreceived by it during the preceding year on all such new mortgages and\n(b) the total amount of interest which such mortgages would have yielded\nif the interest thereon had been at the maximum rate chargeable\nindividual borrowers on such new loans plus an additional interest\ndifferential, not in excess of one percent per annum, determined by the\nagency to be adequate consideration to induce participating banks to\nmake new loans on multiple dwellings.\n (5) The agency shall require the submission to it by each bank from\nwhich the agency has purchased mortgages evidence satisfactory to the\nagency of the making of new mortgage loans and of paying over to the low\nrent lease account as required by this section and in connection\ntherewith may, through its employees or agents or those of the\ndepartment of financial services, inspect the books and records of any\nsuch bank.\n (6) Compliance by any bank with the terms of its agreement with or\nundertaking to the agency with respect to the making of any mortgage\nloans and of paying over to the low rent lease account may be enforced\nby decree of the supreme court. The agency may require as a condition of\npurchase of mortgages from any national banking association the consent\nof such association to the jurisdiction of the supreme court over any\nsuch proceeding. The agency may also require agreement by any bank, as a\ncondition of the agency's purchase of mortgages from such bank, to the\npayment of penalties to the agency for violation by the bank of its\nundertakings to the agency, and such penalties shall be recoverable at\nthe suit of the agency.\n (7) The agency shall require as a condition of purchase of any\nmortgage from a bank that the bank represent and warrant to the agency\nthat\n (a) the unpaid principal balance of the mortgage and the interest rate\nthereon have been accurately stated to the agency;\n (b) the amount of the unpaid principal balance is justly due and\nowing;\n (c) the bank has no notice of the existence of any counterclaim,\noffset or defense asserted by the mortgagor or his successor in\ninterest;\n (d) the mortgage is evidenced by a bond or promissory note and a\nmortgage document which has been properly recorded with the appropriate\npublic official;\n (e) the mortgage constitutes a valid first lien or second lien on the\nreal property described to the agency in accordance with subdivision\nfive of section twenty-four hundred two of this part subject only to\nreal property taxes not yet due, installments of assessments not yet\ndue, and easements and restrictions of record which do not adversely\naffect, to a material degree, the use or value of the real property or\nimprovements thereon;\n (f) the mortgage loan when made was lawful under the banking law or\nfederal law, whichever governs the affairs of the bank, and would be\nlawful on the date of purchase by the agency if made by the bank on that\ndate in the amount of the then unpaid principal balance;\n (g) the mortgagor is not now in default in the payment of any\ninstallment of principal or interest, escrow funds, real property taxes\nor otherwise in the performance of his obligations under the mortgage\ndocuments and has not to the knowledge of the bank been in default in\nthe performance of any such obligation for a period of longer than sixty\ndays during the life of the mortgage, and\n (h) the improvements to the mortgaged real property are covered by a\nvalid and subsisting policy of insurance issued by a company authorized\nby the superintendent of financial services to issue such policies in\nthe state of New York and providing fire and extended coverage to an\namount not less than eighty percent of the insurable value of the\nimprovements to the mortgaged real property.\n (8) Each bank shall be liable to the agency for any damages suffered\nby the agency by reason of the untruth of any representation or the\nbreach of any warranty and, in the event that any representation shall\nprove to be untrue when made or in the event of any breach of warranty,\nthe bank shall, at the option of the agency, repurchase the mortgage for\nthe original purchase price adjusted for amounts subsequently paid\nthereon, as the agency may determine.\n (9) The agency need not require the recording of an assignment of any\nmortgage purchased by it from a bank pursuant to this section and shall\nnot be required to notify the mortgagor of its purchase of the mortgage.\nThe agency shall not be required to inspect or take possession of the\nmortgage documents if the bank from which the mortgage is purchased by\nthe agency shall enter a contract to service such mortgage and account\nto the agency therefor.\n (10) The agency shall maintain a continuous review of the availability\nof funds in regular banking channels for new mortgage loans. In the\nevent that the agency shall determine that an adequate supply of funds\nexists in regular banking channels for new mortgage loans the agency\nshall not authorize the issuance of bonds for the purchase of mortgages\nexcept refunding bonds, until such time as the agency shall determine\nthat the supply of funds available for mortgages is again inadequate.\nThe agency shall notify the governor, the temporary president of the\nsenate, and the speaker of the assembly of any determination that there\nis an inadequate supply of funds available for mortgages made by it\nunder this subdivision. Discontinuance by the agency of the purchase of\nmortgages pursuant to a determination that an adequate supply of funds\nexists in regular banking channels shall not constitute, or in any way\neffect, termination of the agency as provided in subdivision six of\nsection two thousand four hundred three of this title.\n * NB Effective July 23, 2027\n