§ 23-A — Mortgage modifications, evidence of pre-existing indebtedness

§ 23-a. Mortgage modifications, evidence of pre-existing indebtedness.\n1. Notwithstanding the provision of any law, general or special, the\nsupervising agency shall have the power to:\n (i) assign or pledge or contract to assign or pledge any mortgage\nsecuring a loan, including any loan to finance the construction of a\nproject, and any note or bond evidencing indebtedness thereon, made by\nthe municipality in accordance with the provisions of this article, and\nany contract or arrangement, including any subsidy contract or\narrangement, relating to such mortgage, and the receipts to be derived\nfrom any of the foregoing, and may reacquire or accept and contract to\nreacquire or accept any such mortgage, note, bond, contract or\narrangement, including any mortgage, note, bond, contract or arrangement\nmade in substitution thereof, and the receipts to be derived therefrom,\nor\n (ii) consent to and contract for the modification of any of the terms\nof a mortgage, and note or bond secured thereby, made pursuant to\nsection twenty-three of this chapter for the purpose of obtaining\ninsurance of such mortgage loan by the federal government in order to\nrefinance all or any part of the indebtedness evidenced by such mortgage\nand note or bond, or\n (iii) satisfy such mortgage in order to enable the company to obtain\ninsurance by the federal government of a mortgage loan made for the\npurpose of refinancing all or any part of the indebtedness evidenced by\nsuch mortgage and note or bond.\n 2. In the event that the existing mortgage loan is satisfied pursuant\nto this section, the supervising agency may in consideration of the\nissuance of such satisfaction accept a new mortgage and note or bond\ninsured by the federal government in an amount equal to the maximum\nprincipal amount of a mortgage loan the federal government will insure\nor accept the proceeds available to the housing company as a result of\nthe refinancing.\n 3. In the event that there is residual indebtedness, the housing\ncompany shall make and the supervising agency shall accept such\ninstruments evidencing such indebtedness as may be required by the\nsupervising agency as are consistent with the provisions of subdivision\nfifteen of section twelve of this chapter, in such form and upon such\nterms as the supervising agency may approve. In the event that there are\nresidual receipts obligations, the housing company may make and the\nsupervising agency may accept instruments evidencing such obligations in\naccordance with the provisions of subdivision sixteen of section twelve\nof this chapter.\n 4. Notwithstanding any other provisions of this article or any\ngeneral, special or local law, where the supervising agency has made the\nfindings required in subdivision one of section twenty-six or section\ntwenty-six-a and where a project has been approved pursuant to\nsubdivision five of section twenty-six of this chapter, the supervising\nagency may make or contract to make a mortgage loan or exercise other\nrelated powers pursuant to this section or section twenty-three-b or\nsubdivision twenty-two-a of section six hundred fifty-four of this\nchapter without further findings by the supervising agency or further\napproval by the local legislative body.\n 4-a. Notwithstanding the provisions of this article or any general,\nspecial or local law to the contrary, where an existing mortgage loan is\nmodified or satisfied pursuant to this section and the supervising\nagency has approved a new or modified mortgage or mortgages, including a\nmortgage and note or bond insured by the federal government and a\nmortgage to secure residual indebtedness, the supervising agency may\nsell, assign, or otherwise dispose of, at public or private sale, on\nsuch terms and conditions as shall be deemed appropriate by the\nsupervising agency subject to the approval of the comptroller or chief\nfiscal officer of the municipality wherein such agency is located, such\nnew or modified mortgage or mortgages and related instruments.\n 4-b. Notwithstanding the provisions of this article or any general,\nspecial or local law to the contrary, where an existing mortgage loan is\nmodified or satisfied pursuant to this section, the supervising agency\nmay pay or incur fees, costs, expenses and other amounts, whether or not\nany amounts have been appropriated therefor in order to (1) meet a\nmunicipality's obligations under an agreement with the federal\ngovernment on account of mortgage insurance, provided that a\nmunicipality's share of any mortgage insurance claim paid by the federal\ngovernment shall not exceed fifty percent of the insurance benefits paid\nby the federal government, and further provided that a municipality's\nshare of such claims under any contract or contracts entered into\nbetween a municipality and the federal government shall not exceed five\npercent of the outstanding principal amount of all mortgages of the\nmunicipality at any time insured by the federal government and included\nwithin such contract, (2) make loans for, or establish escrow accounts\nfor the issuance of mortgage insurance, (3) absorb discounts associated\nwith any sale, assignment or other disposition of a mortgage note or\nbond insured by the federal government, (4) pay fees required by the\nfederal government as a condition for the issuance of mortgage\ninsurance, (5) install such life safety devices and satisfy such minimum\nproperty standards, as may be required by the federal government which\ndevices or standards are in addition to any requirement imposed by the\nmunicipality as mortgagee and to make loans for such purposes, (6) pay\nclosing and other costs related to obtaining mortgage insurance from the\nfederal government, (7) permit the municipality to issue obligations\nsecured by such mortgage or mortgages, (8) meet such other costs as the\nfederal government may from time to time impose, (9) pay any amounts not\npreviously advanced under a mortgage or mortgages modified or satisfied\npursuant to this section, and (10) hold an amount not to exceed twenty\nmillion dollars at any one time in a revolving account for a period not\nto exceed eighteen months from the time of the first deposit therein, to\npay fees, costs, expenses and other amounts attributable to making and\ninsuring mortgages pursuant to this section or attributable to issuing\nobligations secured by such mortgages. If the municipality sells any\nsuch mortgages insured by the federal government for an amount in excess\nof the principal amount thereof at the time of such sale, or if the\nmunicipality issues obligations secured by any such mortgages and the\nyield on such mortgages is greater than the yield on such obligations\n(the yield on such mortgages and obligations having been calculated in\naccordance with section one hundred three of the internal revenue code\nof the United States and regulations thereunder), then any such premium\nand any such differential may be used by the municipality for any lawful\npurpose, provided, however, that an amount equal to the annual sum of\nsuch premium and such differential, to the extent such differential is\nnot paid to or for the benefit of the holders of such obligations, shall\nbe credited annually by the municipality, at such times as determined by\nthe supervising agency, as a payment by all municipally-aided projects\nthen having residual indebtedness, of the then accrued and unpaid\ninterest on such residual indebtedness. To the extent that any such\ncredit otherwise allocable to a project in any year exceeds unpaid\ninterest on the residual indebtedness of such project in that year, such\nexcess credit shall be allocated among all other eligible projects\nhaving accrued and unpaid interest on residual indebtedness in that\nyear. Notwithstanding the provisions of the foregoing sentence of this\nsubdivision, if an eligible project has made cash payments in any year\nfor the sum of (i) interest on and principal of a federally insured\nmortgage and (ii) interest on and principal of residual indebtedness and\n(iii) all other payments on account of such insured mortgage, including\nmortgage insurance premium and reserves, at least equal to the sum of\n(i) interest and principal which would have been due annually on the\noriginal mortgage loan for the project, at the interest rate in effect\nat the time the project is refinanced, and (ii) all other required\nannual payments on account of such original mortgage loan, such as\nreserve requirements, then any excess credit allocable to such eligible\nproject shall be credited in the next succeeding year as a payment of\ninterest on residual indebtedness of such project before any cash\npayment is required to be made for such interest. Subject to the\nprovisions of the preceding sentence of this subdivision, if the total\nof such credit in any year available for all eligible projects exceeds\nthe total of all accrued and unpaid interest in that year on residual\nindebtedness of all eligible projects then having residual indebtedness,\nan amount equal to such excess credit shall be carried forward and\ncredited in future years as a payment of accrued and unpaid interest on\nresidual indebtedness of eligible projects in future years until such\ntime as no further interest remains unpaid with respect to any residual\nindebtedness of eligible projects. The supervising agency shall divide\nsuch credit among eligible projects on the basis of the respective\noriginal principal amounts of the federally insured mortgages on\neligible projects; provided, however, that such credit shall be\nallocated to projects which receive federal subsidies only to the extent\nthat such subsidies are not thereby reduced. When there is a\nparticipation, new loan or investment pursuant to section twenty-three-b\nof this article for which the consent of a company is required and which\nwill be substantially equivalent to a refinancing pursuant to section\ntwenty-three-a or subdivision twenty-two-a of section six hundred\nfifty-four of this article, then for purposes of this subdivision the\ninterest of the municipality after such participation, new loan or\ninvestment which is secured by a mortgage shall be deemed to be the\nequivalent of residual indebtedness and the interest of entities or\norganizations other than the municipality in such participation, new\nloan or investment shall be deemed to be the equivalent of a federally\ninsured mortgage.\n 5. No company shall accept a mortgage loan to be insured by the\nfederal government made for the purpose of refinancing the existing\nmortgage loan of a company which shall exceed the amount which can be\nsupported by the income derived from the operation of the project at the\nrental rate determined by the supervising agency that would be necessary\nto meet all necessary payments to be made by the company, of all\nexpenses including fixed charges, sinking funds, reserves and dividends\non outstanding stock, as authorized by the supervising agency, if the\nprincipal amount of the original mortgage loan of the company were to be\nfully repaid over the term of such mortgage loan by constant and equal\npayments of principal and interest and if the interest rate on the\ncompany's original mortgage loan was eight and one-half percent per\nannum or, where the original mortgage loan provides for the payment of\ninterest at a maximum rate of less than eight and one-half percent per\nannum, such maximum amount.\n 6. A company shall not accept a mortgage to be insured by the federal\ngovernment for the purpose of refinancing an existing mortgage loan of a\nmunicipally-aided project unless the sum of interest and principal\npayable in respect of such mortgage to be insured by the federal\ngovernment and in respect of any residual indebtedness, over the term of\nsuch mortgage and residual indebtedness, shall be no more than the sum\nof interest and principal that would be payable in respect of the\nexisting mortgage loan, over the term of such existing mortgage loan, at\nan interest rate of eight and one-half percent per annum or where the\nexisting mortgage loan provides for a maximum interest rate of less than\neight and one-half percent, at such maximum interest rate.\n 7. The terms of any mortgage securing residual indebtedness of a\nmunicipally-aided project shall include a provision to the effect that\nso long as the project is subject to a mortgage insured or held by the\nfederal government (a) interest on and principal of such mortgage\nsecuring residual indebtedness shall be payable only if and to the\nextent to which surplus cash, as defined in a regulatory agreement\nexcecuted by the housing company and the federal government, is\navailable, and (b) the failure to pay interest and principal on such\nmortgage securing residual indebtedness shall not constitute an event of\ndefault unless surplus cash is available and not applied to such\npayments of interest and principal.\n 8. Ten days before an initial application is filed with the federal\ngovernment to obtain insurance by the federal government of a mortgage\nfor the purpose of refinancing all or any part of a mortgage loan for a\nmunicipally-aided project pursuant to section twenty-three-a or\nsubdivision twenty-two-a of section six hundred fifty-four of this\nchapter, the supervising agency shall (a) mail to the president or other\nrepresentative of the tenants' association or cooperators' advisory\ncouncil, recognized by the supervising agency for such municipally-aided\nproject, written notice of the proposed refinancing, including a copy of\nsuch initial application, and (b) make a copy of such initial\napplication available at its offices during business hours, for\ninspection and copying by the residents of such municipally-aided\nproject. Ten days before the closing of a proposed participation, new\nloan or investment with respect to a municipally-aided project pursuant\nto section twenty-three-b of this article, the supervising agency shall\n(a) mail to the president or other representative of the tenants'\nassociation or cooperators' advisory council, recognized by the\nsupervising agency for such municipally-aided project, written notice of\nsuch proposed participation, new loan or investment, including a summary\nof the principal terms and conditions thereof, and (b) make a copy of\nsuch summary available at its offices during business hours, for\ninspection and copying by the residents of such municipally-aided\nproject. The unintentional failure of the supervising agency to comply\nwith the foregoing provisions of this subdivision shall not invalidate\nor otherwise affect any such refinancing of a mortgage loan or any such\nparticipation, new loan or investment.\n