§ 1152 — Affordable housing development loans

§ 1152. Affordable housing development loans. 1. (a) Notwithstanding\nthe provisions of any general, special or local law, one or more private\nlenders and the city of New York, acting through the agency, shall have\nthe power to participate and invest in making loans to sponsors for the\nconstruction of eligible projects. Such loans may be made exclusively\nfor or may include such amounts as may be required for site acquisition\nor the refinancing of eligible projects. Each such participation loan\nshall be secured by a bond or note and single participating mortgage or\nby separate bonds or notes and mortgages upon the eligible project. Such\nbond or note and mortgage or bonds or notes or mortgages may contain\nsuch other terms and provisions not inconsistent with the provisions of\nthis article as the agency may deem necessary or desirable, including,\nbut not limited to, terms providing that the lien created by such note\nand mortgage, and, if applicable, any regulatory agreement executed by\nthe sponsor and such agency or restrictive covenant approved by such\nagency, may be recorded in an equal or subordinate position, or\nsubsequently made equal or subordinate, to the lien created by any\nprivate lender against such eligible project.\n (b) Notwithstanding the provisions of any general, special or local\nlaw, and in addition to the power to make or contract to make\nparticipation loans granted by paragraph (a) of this subdivision, the\ncity of New York, acting through the agency, shall have the power to\nmake or contract to make loans or grants to any owner described in\nparagraph (a) of this subdivision without the participation of a private\nlender, on the same terms as permitted under such paragraph for a\nparticipation loan.\n 2. The agency may enter into an agreement with a private lender to\ndeposit its share of a loan with the private lender to be advanced by\nthe private lender. The portion of the loan funded by the agency may be\nequal to or subordinate in lien to the portion of the loan funded by the\nprivate lender and may contain such terms with respect to interest rate,\nif any, rate of amortization of principal, if any, and time of payment\nof interest and principal as determined by the agency. The agency may\nmake provision either in the mortgage or mortgages or by separate\nagreement for the performance by the private lender of such services as\nare generally performed by a banking institution which itself holds a\nmortgage, including, without limitation, construction loan advances,\nconstruction supervision, initiation of foreclosure proceedings,\nprocurement of insurance, and all other matters in connection with the\nfinancing, supervision, regulation and audit of any such loan to any\nsuch eligible project.\n 3. If the eligible project is to consist of one to four unit dwelling\naccommodations or cooperative or condominium units, the agency's share\nof the loan may be converted after completion of construction into\nmortgages on such dwelling accommodations or condominium units or\nfinancing statements filed with respect to such cooperative shares,\nprovided such units or such cooperative shares are purchased by persons\nof low income. Such mortgages and any blanket mortgage that the agency\nretains on any portion of, or on all of, the eligible project may\nprovide that such mortgages and such blanket mortgage will automatically\nbe reduced to zero over a period of continuous compliance by the\nmortgagor with a regulatory agreement or restrictive covenant with or\napproved by the agency and upon the satisfaction of any additional\nconditions specified therein. Notwithstanding such provision as\ncontained in such mortgage, the loan shall be reduced to zero only if,\nprior to or simultaneously with delivery of such mortgage, the agency\nmade a written determination that such reduction would be necessary to\nensure the continued affordability or economic viability of the eligible\nproject. Such written determination shall document the basis upon which\nthe loan was determined to be eligible for evaporation. Such period of\ncontinuous compliance with such regulatory agreement or restrictive\ncovenant shall not be less than fifteen years.\n 4. If the eligible project is to consist of one to four unit dwelling\naccommodations or cooperative or condominium units, the agency shall\nrequire that the dwelling units be offered only to bona fide purchasers\nwho intend to occupy a unit as their principal place of residence;\nprovided, however, that in the case of two to four unit dwelling\naccommodations the bona fide purchaser may occupy only a single unit as\na principal place of residence. If the purchaser ceases to occupy the\nunit as a principal place of residence, the agency may provide for\nrecapture of all or a portion of the agency's share of the loan.\n 5. If the eligible project is a rental project, the agency's share of\nthe loan may be converted after completion of construction into a\npermanent loan with a term of forty years, provided that such period may\nbe extended as the agency may determine is necessary to ensure the\ncontinued affordability or economic viability of the eligible project,\npayable in such manner as may be provided in the note and any mortgage\nin connection with such loan. Such note and mortgage may contain such\nterms and conditions as the agency may deem necessary or desirable to\neffectuate the purposes and provisions of this article. The sponsor or\nany subsequent owner or owners of such a project shall agree to rent\nsuch units only to persons of low income for such period as the agency\nmay determine. All such units shall be subject to the emergency tenant\nprotection act of nineteen seventy-four and the rent stabilization law\nof nineteen hundred sixty-nine, as amended, unless converted to a\ncooperative or condominium pursuant to subdivision seven of this\nsection. Initial rentals for all rental units shall be set by the\nagency.\n 6. If the eligible project is a rental project annual profits shall be\nlimited to an amount set by the agency for as long as the loan is\noutstanding. Excess profits shall be used to establish project reserves,\nprovide capital improvements or reduce the principal amount of the\nagency's loan, as determined by the agency.\n 7. If the eligible project is a rental project, no conversion to a\ncooperative or condominium shall be permitted for a period of twenty\nyears after initial occupancy, and unless (i) the agency's share of the\nloan is prepaid upon such conversion, (ii) the conversion shall be done\npursuant to section three hundred fifty-two-eeee of the general business\nlaw as a non-eviction plan, and (iii) apartments occupied by\nnon-purchasing tenants continue to be subject to the rent stabilization\nlaw of nineteen hundred sixty-nine as amended, until the occurrence of a\nvacancy.\n 8. A loan made pursuant to this article shall be exempt from the\nmortgage recording taxes imposed by article eleven of the tax law.\n 9. Notwithstanding the provisions of any general, special or local law\nor charter, the agency shall have power, without soliciting competing\nbids, to contract with any sponsor or to make provision in a loan for\nthe construction or reconstruction of any site improvements located in\nthe public right-of-way or on the eligible site which are necessary for\nthe development of an eligible project. Such site improvements may\ninclude, but shall not be limited to, streets, sidewalks, landscaping,\nparks and open space, social, recreational, communal and other\nnon-residential facilities and the outfitting thereof, lighting\nfixtures, and water and sewer lines, incidental or appurtenant to the\nconstruction of such eligible projects.\n 10. No loan shall be made pursuant to the provisions of this article\nunless the agency finds that: (a) the construction of the eligible\nproject does not directly displace current low and moderate income\nresidents of the eligible site; (b) the eligible project leverages\nprivate and other public investment, if any, so as to reduce the amount\nof assistance provided pursuant to this article to the minimal amount\nwhich is necessary for construction of the eligible project; (c) the\neligible project will be built by a private developer/builder who has\nagreed to limit its profit in accordance with a formula satisfactory to\nthe agency; (d) the eligible project will provide assistance to an area\nwhich is blighted or deteriorated or has a blighting influence on the\nsurrounding area, or is in danger of becoming a slum or a blighted area\nbecause of neighborhood conditions indicating an inability or\nunwillingness of the private sector to cause the type of construction\nfor which a loan is to be provided; and (e) the eligible project will\nmake home ownership or rental housing affordable to persons who cannot\npresently afford the housing available based upon the ordinary unaided\noperation of private enterprise.\n 11. a. The agency may make non-interest bearing advances to sponsors\nto defray the pre-development costs of eligible projects in accordance\nwith the provisions of this chapter.\n b. No such advances shall be made unless the agency finds that: (i)\nthe sponsor proposes to finance the eligible project in whole or in part\nby a loan granted pursuant to this article or that the project, if\notherwise financed, will provide housing for persons or families of low\nincome, and that such project is otherwise consistent with the purposes\nof this article; (ii) the project site is suitable, there is a need for\nthe housing type proposed in the area to be served and the project is\nfeasible; and (iii) it is reasonable to anticipate that financing will\nbe obtained and the agency makes a finding to that effect.\n c. No such advances may be made to a sponsor unless such sponsor\nenters into an agreement with the agency which provides that such\nsponsor shall be regulated with respect to rents, profits, dividends and\ndisposition of its property or franchise, in accordance with the\nprovisions of this article.\n d. An advance granted pursuant to this section shall be used only to\ndefray the pre-development costs of eligible projects. For purposes of\nthis subdivision, the term pre-development costs shall include, but\nshall not be limited to: the reasonable and necessary costs for\nplanning, site preparation, developing architectural drawings and\nconducting engineering and environmental studies, but shall not include\nacquisition of land or buildings, drainage and landscaping of vacant\nland, construction of new buildings or the reconstruction or\nrehabilitation of existing buildings.\n e. Each such advance shall be repaid in full to the agency by the\nsponsor. Such repayment shall be made upon receipt by the sponsor or its\nsuccessor in interest of the proceeds of its mortgage or construction\nloan for the eligible project, unless the agency extends the period for\nthe repayment of such advances. In no event shall the time of repayment\nbe extended to a date later than the date of final advance of funds\npursuant to such mortgage or construction loan. Notwithstanding this\nparagraph, the agency may reduce such advance to zero over a period of\ncontinued compliance with the agency's agreement with the sponsor\npursuant to paragraph c of this subdivision if the agency has made a\nwritten determination that such reduction would be necessary to ensure\nthe continued affordability or economic viability of the eligible\nproject. Such written determination shall document the basis upon which\nthe agency's non-interest bearing advance was determined eligible for\nevaporation.\n f. If the agency, in its discretion, determines at any time that\nmortgage or construction financing for the eligible project may not be\nobtained, then all advances made to the sponsor pursuant to this\nsubdivision shall become immediately due and payable upon the demand of\nthe agency.\n 12. If the eligible project is a rental project, the bond or note and\nmortgage or bonds or notes or mortgages issued by the sponsor of any\neligible project to secure a participation loan may provide that the\ncity's portion of such loan shall be reduced to zero commencing on the\nfifteenth year after the execution of such bond or note and mortgage or\nbonds or notes or mortgages, provided that, as of the date of any such\nreduction, the eligible project has been and continues to be owned and\noperated in a manner consistent with a regulatory agreement with the\ncity. Notwithstanding such provision as contained in the bond or note\nand mortgage or bonds or notes or mortgages, the loan shall be reduced\nto zero only if, prior to or simultaneously with delivery of such bond\nor note and mortgage or bonds or notes or mortgages, the agency made a\nwritten determination that such reduction would be necessary to ensure\nthe continued affordability or economic viability of the eligible\nproject. Such written determination shall document the basis upon which\nthe loan was determined to be eligible for evaporation.\n