§ 2405-D — Lease-to-own program

New York § 2405-D

• Jurisdiction: New York
• Law PBA: Public Authorities
• Title 17: State of New York Mortgage Agency Act
• Part 1: No title
• Art. 8: Miscellaneous Authorities

Text

* § 2405-d. Lease-to-own program. (1) The agency is authorized to\nparticipate in lease-to-own programs as described in this section. The\npurpose of a lease-to-own program is to provide mortgage financing for a\nresidence occupied as a primary residence by a prospective mortgagor\npursuant to a lease-to-own contract with the owner of such property. The\nlease-to-own contract shall provide for the eventual purchase by the\nresident of the residence and an interim lease of the residence prior to\nthe closing of the purchase thereof. The party to the lease-to-own\ncontract who is the seller of the residence is referred to in this\nsection as the "seller". The prospective purchaser who is a party to the\nlease-to-own contract is referred to in this section as the\n"tenant-purchaser". A "residence" for the purpose of this section is a\nsingle-family home, a condominium housing unit or a housing unit owned\nby a cooperative housing corporation.\n (2) The agency may contract to acquire and may acquire a mortgage loan\nor loans made by a bank to a seller who has entered a lease-to-own\ncontract with an eligible tenant-purchaser for the property which is the\nsubject of and security for such mortgage loan.\n (3) (a) The lease-to-own contract shall contain:\n (i) a lease of the residence, or in the case of cooperative housing\nunits a sublease, for a term not to exceed five years.\n (ii) provision for a rental payment not less than the sum of (A) an\namount sufficient to pay the estimated real property taxes and insurance\non the residence, or in the case of a cooperative unit, the maintenance\ncharges; (B) the cost of routine maintenance of the residence unless the\nlease-to-own contract requires the tenant-purchaser to perform such\nmaintenance at his own expense; (C) an amount sufficient to pay the\ninterest on the mortgage loan held by the agency on the residence less\nthe estimated earnings on the escrow fund provided for in subdivision\nfour of this section which is allocable to such mortgage held by the\nagency; (D) an amount to be held in escrow, referred to as the\n"tenant-purchaser escrow", which, when accumulated over the period of\nthe lease-to-own contract, will amount to a sum sufficient to pay the\ntenant-purchaser's required down payment under the lease-to-own contract\nplus the estimated closing costs of purchase which will be allocable to\nthe tenant-purchaser, including the seller's closing costs at the\ninitial closing of the mortgage to the seller; and (E) in the case of a\ncondominium unit, common charges.\n (iii) provisions obligating the tenant-purchaser to buy and the seller\nto sell the residence at the end of the lease term.\n (iv) a provision under which the seller waives specific performance\nwith respect to the tenant-purchaser's obligation to purchase.\n (v) a provision that default by the tenant-purchaser under the\nprovisions of the lease-to-own contract shall result in the forfeiture\nto the seller of all amounts in the tenant-purchaser escrow.\n (vi) a provision that the tenant-purchaser shall have the option upon\nreasonable notice to the seller and the agency to elect to close the\npurchase of the residence at an earlier date than that specified in the\nlease-to-own contract.\n (vii) a provision that the rent shall be adjusted under the\nlease-to-own contract periodically to take account of changes in taxes,\ninsurance, escrow earnings and other variables intended to be covered by\nthe tenant's rental payment.\n (viii) a provision governing the consequences of default by each of\nthe parties.\n (b) The provisions of the emergency housing rent control law, the\nlocal emergency housing rent control act, the city rent and\nrehabilitation law, the emergency tenant protection act of nineteen\nseventy-four and the New York city rent stabilization law of nineteen\nhundred sixty-nine shall not apply to a residence subject to a\nlease-to-own mortgage, provided that the mortgage is purchased by the\nagency. Such exemption shall begin at the commencement of the lease term\nand shall endure for so long thereafter as the agency holds the mortgage\nloan. The agency shall not sell the mortgage loan prior to the closing\nof the transfer of title to the tenant-purchaser or default by the\ntenant-purchaser under the lease-to-own contract.\n (c) The agency shall adopt procedures to ensure that the payments\ncontemplated by subparagraph (ii) of paragraph (a) of this subdivision\nare in fact applied to those purposes.\n (4) (a) The mortgage loan documents with respect to a mortgage loan\nacquired by the agency pursuant to this section shall provide that there\nshall be retained as additional security for the mortgage loan an amount\nnot less than fifteen percent of the purchase price stated in the\nlease-to-own contract. The amount retained shall be disbursed in cash at\nthe mortgage closing to an escrow fund held by the owner of the\nmortgage. When the agency becomes the owner of the mortgage loan, the\nagency shall receive the escrow amount to be held by the agency in\nescrow. The escrowed funds may be invested by the agency in securities\nin which the agency is authorized to invest its own funds. All banks and\ntrust companies are authorized to give such security for deposits by the\nagency of escrowed funds as determined by the agency. The escrow amounts\npertaining to various lease-to-own mortgage loans may be commingled for\ninvestment purposes, but the agency shall keep books of account showing\nthe amount to the credit of each individual escrow account. The\ninvestment earnings on each individual escrow account shall be credited\nto the interest payment on the applicable mortgage loan.\n (b) The agency shall advise the seller at periodic convenient\nintervals of the amount of such earnings with respect to each mortgage\nloan.\n (5) With the agency's approval, the lease-to-own contract may provide\nthat, so long as the seller is not in default, in lieu of the\nestablishment of a tenant-purchaser escrow account, that the portion of\nthe tenant-purchaser's rental payments allocable to such an account may\nbe received by the seller first as reimbursement of the seller's costs\nof closing of the initial mortgage to the seller and, second, to be\ncredited to the purchase price of the premises.\n (6) (a) At the closing of the transfer of title to the residence to\nthe tenant-purchaser pursuant to the lease-to-own contract, the agency\nshall disburse the escrow amount to or for the account of the\ntenant-purchaser.\n (b) At such closing, the agency shall require the tenant-purchaser to\nfurnish private mortgage insurance if such insurance is required in the\ncase of other mortgage loans under this title. If such insurance is not\nobtainable in the private market at the time of such closing, the agency\nis authorized to issue such insurance.\n (7) The agency shall establish such requirements with regard to\nlease-to-own contracts, lease-to-own residences, the qualifications of\ntenant-purchasers, and the agency's participation in any lease-to-own\nprogram, as may be deemed appropriate by the agency to achieve the\nobjectives of this section. The agency's requirements, including but not\nlimited to income limits applicable to the tenant-purchaser and the\npurchase price of the residence, must be satisfied at or before the time\nthe mortgage loan is purchased, and the tenant-purchaser must be deemed\nqualified by the agency at the time.\n (8) Notwithstanding any other provision of law, the agency is\nauthorized to require, as a condition to the financing of any mortgage\nwith respect to a lease-purchase residence, such restrictions upon\nassumability of the mortgage, default provisions, rights to accelerate,\nand other terms as the agency may determine to be necessary or\ndesirable. All such terms shall be enforceable by the originating bank,\nthe agency, and any successor holder of the mortgage unless expressly\nwaived in writing by or on behalf of the agency.\n (9) The provisions of this section shall expire and be of no further\nforce and effect on and after July first, nineteen hundred ninety-five.\n * NB Expired July 1, 1995\n