§ 304 — Purposes, powers and operation

§ 304. Purposes, powers and operation. 1. The purpose of the\ncorporation shall be to assist, promote, encourage and stimulate the\ndevelopment and rehabilitation of blighted areas by rendering financial\nassistance in the construction, rehabilitation or purchase of housing\naccommodations in blighted or deteriorating urban areas in this state by\nmaking first mortgage loans in areas designated by the corporation, such\nloans to be made on a sound economic basis by the application of sound\nmortgage lending principles.\n 2. It is not the intention or the purpose of the powers herein granted\nto take from banking or insurance organizations any such loans or\ncommitments as may be desired by such organizations generally in the\nordinary course of their business; provided however, that the\ncorporation need not make any specific inquiry or find as a fact that\nany banking or insurance organization desires to make any such loan.\n 3. In furtherance of the purpose set forth in subdivision one of this\nsection, and in addition to the powers conferred on stock corporations\nby general laws, the corporation shall, subject to the restrictions and\nlimitations contained in this article, have the following powers:\n (a) To issue and sell for cash capital stock of the corporation.\n (b) To issue and sell its debentures bearing such interest rates and\nhaving such maturities and other terms and provisions as may be\ndetermined by the board of directors of the corporation.\n (c) To invest in bonds and mortgages or notes and mortgages upon\nimproved and unencumbered real property in areas in this state\ndesignated by the board of directors of the corporation as blighted,\nover-crowded, or deteriorating areas, subject to the following\nconditions:\n (i) The board of directors shall be satisfied with respect to each\nloan that it is economically sound.\n (ii) No such loan shall be in an amount in excess of eighty per centum\nof the corporation's appraised value of such real property, except that\nsuch loan may exceed eighty per centum when guaranteed or insured by the\nfederal government or any agency thereof.\n (iii) Any appraisal of such property shall be based on its long-term\neconomic value with due consideration being given, among other factors,\nto its physical maintenance and, in the case of income-producing\nproperties, to its stabilized rental value after adequate vacancy\nallowances. Except in cases of new construction no appraisal of an\nincome-producing property shall be undertaken by the corporation unless\nit has first been supplied by the loan applicant with a current rent\nroll and statement of income and expense for the twelve-month period\npreceding the date of the loan application, certified by such loan\napplicant and in form and substance satisfactory to the corporation.\n (iv) No loan shall be made on any existing housing accommodation\nunless (a) such housing accommodation is in physical condition\nsatisfactory to the corporation or (b) the loan applicant is committed\nto restore such housing accommodation to satisfactory condition prior to\nthe loan closing, or, at the discretion of the corporation, within a\nspecified period after closing, out of the proceeds of the loan.\n (v) No loan shall be made on a housing accommodation unless (a) such\nhousing accommodation has a suitable heating system satisfactory to the\ncorporation, or (b) the loan applicant is committed to install suitable\nheating facilities out of the proceeds of such loan.\n (vi) Any such loan shall be for one or more of the following purposes\nonly:\n A. To finance the improvement or rehabilitation of an existing housing\naccommodation.\n B. To consolidate, refinance or liquidate existing mortgage\nindebtedness on a housing accommodation.\n C. To finance the bona fide purchase of a housing accommodation,\nprovided that except in cases of loans insured or guaranteed by the\nfederal government or any agency thereof, the purchaser of the real\nproperty which is to constitute the security for the proposed loan has\npaid to the seller in cash an amount equal to at least twenty per centum\nof the purchase price of such real property.\n D. To finance the construction of new housing accommodations.\n (vii) The board of directors of the corporation shall cause to be\nincluded in each mortgage the following protective provisions and\nrestrictions (in addition to those contained in the statutory form M\nmortgage with lien covenant as contained in section two hundred\nfifty-eight of the real property law), provided that any and all of the\nsaid provisions and restrictions may be waived by the corporation where\nthe corporation is purchasing or otherwise acquiring an already existing\nmortgage:\n A. A provision requiring the mortgagor to obtain the prior written\nconsent of the holder of the first mortgage to the creation of any\njunior liens, charges or encumbrances affecting the real property. In\nits sole and absolute discretion the corporation may modify or waive the\ninclusion of this provision in any mortgage.\n B. A provision requiring the mortgagor to accumulate and maintain with\nthe holder of the first mortgage, so long as the mortgage is held by it,\na fund for the proper repair and maintenance of the mortgaged premises.\nThe amount and type of such fund and conditions under which it shall be\naccumulated, applied and replenished shall be specified in the mortgage.\nSuch fund may be applied from time to time to the repair or maintenance\nof the property by the mortgagor with the written consent of the holder\nof the first mortgage. Such fund shall be applied by the mortgagor at\nthe direction of such holder, when such application is deemed necessary\nby such holder for the reasonable protection of the property. In its\nsole and absolute discretion the corporation may waive the inclusion of\nthis provision in any mortgage.\n C. A provision permitting the mortgagor to repay the principal amount\nof the loan or any part thereof at any time without penalty, except that\nthe mortgage may, in the discretion of the board of directors, contain a\nprovision for a prepayment penalty not exceeding two per centum of any\namount repaid within three years after the closing of the loan in\naddition to such regular repayments without penalty as may be provided\nin the mortgage.\n (viii) No loan shall be made by the corporation unless the real\nproperty which is to secure such loan is, or upon application of the\nloan proceeds will be, unencumbered, and the corporation shall have been\nfurnished with satisfactory evidence that such real property is or upon\napplication of the loan proceeds will be in compliance with all\napplicable laws, ordinances and regulations of governments, whether\nfederal, state, county or municipal, or agencies or instrumentalities\nthereof, having jurisdiction.\n (ix) Such other and further conditions as the board of directors in\nits sole and absolute discretion may deem advisable in the interest of\nconducting the affairs of the corporation in accordance with sound\neconomic and mortgage lending principles.\n (x) The mortgage shall provide that violation of any of the foregoing\nconditions by the mortgagor shall constitute an event of default,\nentitling the holder of the first mortgage to accelerate maturity of the\nmortgage obligation.\n (xi) The mortgage shall provide for maturity of the loan and\namortization thereof at such rate as shall be deemed appropriate by the\nboard of directors in accordance with sound mortgage lending practice,\nprovided that except in cases of loans insured or guaranteed by the\nfederal government or any agency thereof, no mortgage shall have a\nmaturity in excess of twenty years from the date of closing.\n (xii) The enumeration herein, or in any lending rules or regulations\npromulgated by the corporation, of conditions or criteria relating to\nthe granting of any mortgage loan shall impose no obligation on the\ncorporation to grant any application for a loan which fulfills such\nconditions or criteria. The authority of the corporation to decline any\nloan application for any reason whatsoever shall be absolute and\nunconditional.\n (xiii) Nothing contained in this article shall be construed as\nsignifying a legislative intent to define what constitutes prudent\nlending practice for banking, insurance or other organizations.\n (d) To sell without recourse bonds and mortgages or notes and\nmortgages acquired pursuant to subdivision three (c) of this section, at\nsuch prices and upon such terms and conditions as the board of directors\nof the corporation shall determine; to service or continue to service\nsuch bonds and mortgages and to manage such properties for any of its\nmembers, provided that if the purchaser be a member, the said bond and\nmortgage or note and mortgage is in all respects eligible for investment\nby the particular member purchasing the same.\n (e) To acquire, subscribe for, own, hold, sell, assign, transfer,\npledge or otherwise dispose of obligations of the United States with\nmaturities not in excess of three years.\n (f) For the purpose of protecting its interests, to release any\nobligation to pay or guarantee the payment of principal or interest, or\notherwise to waive or modify any of the terms and conditions of any bond\nand mortgage, and of any note and mortgage, and to extend or re-extend\nany bond and mortgage, and any note and mortgage, and to accept a sum\nless than the principal amount thereof in the full payment and\nsatisfaction of the same.\n (g) In addition to interest rates within legal limits the corporation\nmay impose a service charge upon the mortgagor or owner which shall not\nexceed two per centum of the total amount of the loan.\n (h) To apply for status as an approved mortgagee under the national\nhousing act and to act as a mortgagee under said act.\n 4. The corporation shall have the power to purchase, receive, hold,\nlease or otherwise acquire, and to sell, convey, mortgage, lease, pledge\nor otherwise dispose of, upon such terms and conditions as its board of\ndirectors may deem advisable, real and personal property, together with\nsuch rights and privileges as may be incidental and appurtenant thereto\nand the use thereof, including, but not restricted to, any real or\npersonal property acquired by such corporation, from time to time in the\nsatisfaction of debts or enforcement of obligations, provided that the\ncorporation may purchase or acquire only the following real estate:\n (a) Plots whereon there are or may be erected buildings suitable for\nthe convenient transaction of the business of the corporation.\n (b) Such real property as shall be conveyed to it in satisfaction of\ndebts previously contracted in the course of its business.\n (c) Such real estate as it shall purchase at sales under judgments,\ndecrees or mortgages held by it.\n (d) In lieu of instituting an action to foreclose a mortgage lien, the\ncorporation may purchase a deed to the underlying real property.\n