2405 - Purchase of existing mortgages.

* §  2405. Purchase of existing mortgages. (1) A purpose of the agency  shall be to purchase existing mortgages  from  banks  within  the  state  during  periods  when  there is an inadequate supply of credit available  for new residential mortgages and to require such  banks  to  invest  an  amount  equal  to  the  proceeds  thereof  as rapidly as possible in new  mortgages on residential real  property  for  family  units  within  the  state.    It  is  hereby  found  and declared that such activities by the agency  will alleviate a condition of affairs in this state which is contrary to  the public health, safety and general welfare and which has  constituted  in  the  past  and  from  time  to time in the future can be expected to  constitute a public emergency. It is further  found  and  declared  that  such  purposes  are in all respects for the benefit of the people of the  state of New York and the agency shall  be  regarded  as  performing  an  essential  governmental  function  in  carrying  out its purposes and in  exercising the powers granted by this title.    (2) The agency shall purchase existing mortgages from  banks  at  such  prices  and  upon  such  terms  and  conditions  as  it shall determine;  provided, however, that  the  total  purchase  price  for  all  existing  mortgages  which  the  agency commits to purchase from a bank at any one  time shall in no event be more than the total of  the  unpaid  principal  balances thereof, plus accrued interest thereon.    (3)  (a)  The  agency  shall  require  as  a  condition of purchase of  existing mortgages from banks that such banks shall, within such  period  as may be approved by the agency not in excess of ninety days of receipt  of the purchase price, enter into written commitments to loan and shall,  within  such  period  as  may  be approved by the agency, loan an amount  equal to the entire purchase price of such  existing  mortgages  on  new  mortgages  within  the  state  having  such  terms  as  the  agency  may  prescribe.    (b) (i) The proportionate  dollar  amount  of  commitments  from  each  agency  issue of bonds or notes used to purchase mortgages from banks in  each region of the state, as such regions are set forth  in  subdivision  nine  of  section  twenty-four  hundred  twenty-six of this title shall,  subject to subparagraph (ii) hereof, reflect  the  proportion  that  the  number of families in each region bears to the number of families in the  state as a whole.    (ii)  To  the extent that the reasonable demand by banks in any region  is insufficient to accommodate the proportion  of  an  agency  issue  of  bonds  or  notes determined pursuant to subparagraph (i) hereof for such  region, the agency shall use reasonable efforts  to  purchase  mortgages  such  that  the  excess funds from such region are distributed among the  other regions in  proportion  to  the  relative  reasonable  demand.  In  determining  reasonable  demand,  the agency shall consider, among other  things, historical demand for mortgages  in  such  regions,  the  dollar  amount  of  offers  by  banks  to  sell  mortgages to the agency and the  reasonableness of such offers, considering the size,  mortgage  history,  total  assets, liquidity and financial ability of the bank to conform to  the contract of sale and the bank's record  of  compliance  with  agency  requirements.    (iii)  The  agency shall use its best efforts to the end that not less  than one-sixth in dollar amount of  new  mortgages  resulting  from  its  program   of   purchasing   mortgages  shall  be  on  newly  constructed  residences. A newly constructed residence is defined as a  one  to  four  family dwelling not previously occupied.    (iv)  During  the  time  that  the  agency is accepting offers to sell  mortgages from banks, the  agency  shall  advertise,  in  newspapers  of  general  circulation  within  the  state,  the fact that it is acceptingoffers from banks, and such other information as the  agency  determines  to be helpful in generating maximum participation by banks and potential  mortgagors.  All  banks  within each such region shall be invited by the  agency  to  participate  in  the agency's purchase of mortgages from the  proceeds of the sale of each issue by the agency of its bonds and notes.  The allocation of the proceeds of each such agency issue among the banks  requesting  participation  within  each  region  shall,  to  the  extent  practicable,  maximize  the  number  of  banks  which  participate.  Any  commitment between the agency and a bank shall  require  that  the  bank  provide  the agency with such information, as may be deemed necessary by  the agency, for the agency to assure that the requirements of this title  or any other requirements imposed by the  agency  with  respect  to  the  purchase  of mortgages with the proceeds of any agency issue of bonds or  notes has been fulfilled.    (c) No commitment to loan or loan on  a  mortgage  secured  or  to  be  secured  by  a  multiple  dwelling  shall  satisfy  the  requirement  of  paragraph (a) of this subdivision unless the prior written  approval  of  such commitment shall have been obtained from the agency. The agency may  refuse  to  approve  any  commitment to lend on such a multiple dwelling  mortgage if so required by the terms of any bonding resolution and shall  not approve any commitment to lend on such a multiple dwelling  mortgage  if  the  approval thereof would increase the total dollar amount of such  commitments on multiple dwelling mortgages approved by the agency to  an  amount  in  excess  of  forty percent of the total purchase price of all  mortgages theretofor purchased by the agency pursuant to this section.    (4) In the case of individual borrowers, new mortgages made  by  banks  that  sell existing mortgages to the agency shall bear interest computed  in accordance with section 5-501 of the general obligations law (whether  or not insured or guaranteed by the United  States  of  America  or  any  agency  thereof)  at  a  rate which does not exceed the maximum interest  rate, if any, set by the agency for such mortgages. The agency  may  set  such  a maximum interest rate chargeable to individual borrowers on such  new mortgages, notwithstanding the maximum interest rate, if any,  fixed  by  section  5-501  of  the general obligations law or any other law not  specifically amending or applicable to this section, at  the  rate  that  the  existing mortgages purchased by the agency were discounted to yield  plus an interest differential, not in excess of one percent  per  annum,  which  the  agency  from  time  to  time  shall determine to be adequate  consideration to induce such banks to sell  existing  mortgages  to  the  agency  and  to loan an amount equal to the proceeds on new mortgages in  furtherance of the purposes of and subject to  the  conditions  of  this  title. In the case of corporate borrowers, such new mortgages shall bear  interest  at  a  rate  not substantially lower than the rate of interest  that banks are charging at the time  of  commitment  on  comparable  new  mortgages.  Each  such  bank that sells existing mortgages to the agency  shall annually account and pay over to the agency or  to  the  New  York  state  housing finance agency for deposit in and for the purposes of the  low rent lease account as  set  forth  in  paragraphs  (a)  and  (b)  of  subdivision  four of section forty-four-a of the private housing finance  law or any successor entity as the agency may direct,  or  to  both  the  agency  and  the  New York state housing finance agency for such deposit  and purposes in such proportions as the agency  may  direct,  an  amount  equal  to the difference between (a) the total amount of interest (which  shall include all charges to individual  and  corporate  borrowers  that  would  be  treated  as  interest  under  section  5-501  of  the general  obligations law and any regulations of the  banking  board  pursuant  to  section  fourteen-a  of  the  banking  law)  received  by  it during the  preceding year on all such new mortgages and (b)  the  total  amount  ofinterest  which  such  new  mortgages would have yielded if the interest  thereon had been at the maximum rate chargeable to individual  borrowers  on  such  new mortgages plus an additional interest differential, not in  excess of one percent per annum, determined by the agency to be adequate  consideration  to  induce  participating  banks  to  make  new  loans on  multiple dwellings.    (5) The agency shall require the submission to it by  each  bank  from  which  the agency has purchased existing mortgages evidence satisfactory  to the agency of the making of new mortgage loans and of paying over  to  the low rent lease account as required by this section and in connection  therewith  may,  through its employees or agents or those of the banking  department, inspect the books and records of any such bank.    (6) Compliance by any bank with the terms of  its  agreement  with  or  undertaking  to  the  agency  with  respect  to  the  making  of any new  mortgages in connection with the  sale  of  existing  mortgages  and  of  paying  over  to the low rent lease account may be enforced by decree of  the supreme court. The agency may require as a condition of purchase  of  existing  mortgages from any national banking association the consent of  such association to the jurisdiction of the supreme court over any  such  proceeding.  The  agency  may  also  require agreement by any bank, as a  condition of the agency's purchase of existing mortgages from such bank,  to the payment of penalties to the agency for violation by the  bank  of  its  undertakings to the agency, and such penalties shall be recoverable  at the suit of the agency.    (7) The agency shall  require  as  a  condition  of  purchase  of  any  existing mortgage from a bank that the bank represent and warrant to the  agency that    (a) the unpaid principal balance of the mortgage and the interest rate  thereon have been accurately stated to the agency;    (b)  the  amount  of  the  unpaid  principal balance is justly due and  owing;    (c) the bank has no notice  of  the  existence  of  any  counterclaim,  offset  or  defense  asserted  by  the  mortgagor  or  any  successor in  interest;    (d) the mortgage is evidenced by a  bond  or  promissory  note  and  a  mortgage  document which has been properly recorded with the appropriate  public official;    (e) the mortgage constitutes a valid first lien or second lien on  the  real  property  described  to  the agency in accordance with subdivision  five of section twenty-four hundred two of this  part  subject  only  to  real  property  taxes  not  yet due, installments of assessments not yet  due, and easements and restrictions of record  which  do  not  adversely  affect,  to  a material degree, the use or value of the real property or  improvements thereon;    (f) the mortgage when made was lawful under the banking law or federal  law, whichever governs the affairs of the bank, and would be  lawful  on  the  date  of purchase by the agency if made by the bank on that date in  the amount of the then unpaid principal balance;    (g) the mortgagor is  not  now  in  default  in  the  payment  of  any  installment  of principal or interest, escrow funds, real property taxes  or otherwise in the performance of his obligations  under  the  mortgage  documents  and  has  not to the knowledge of the bank been in default in  the performance of any such obligation for a period of longer than sixty  days during the life of the mortgage; and    (h) the improvements to the mortgaged real property are covered  by  a  valid  and subsisting policy of insurance issued by a company authorized  by the superintendent of insurance to issue such policies in  the  state  of  New  York  and providing fire and extended coverage to an amount notless than eighty percent of the insurable value of the  improvements  to  the mortgaged real property.    (8)  Each  bank shall be liable to the agency for any damages suffered  by the agency by reason of the untruth  of  any  representation  or  the  breach  of  any warranty and, in the event that any representation shall  prove to be untrue when made or in the event of any breach of  warranty,  the  bank  shall,  at  the option of the agency, repurchase the existing  mortgage  for  the  original  purchase  price   adjusted   for   amounts  subsequently paid thereon, as the agency may determine.    (9)  The agency need not require the recording of an assignment of any  existing mortgage purchased by it from a bank pursuant to  this  section  and shall not be required to notify the mortgagor of its purchase of the  mortgage. The agency shall not be required to inspect or take possession  of  the  mortgage documents if the bank from which the existing mortgage  is purchased by the agency  shall  enter  a  contract  to  service  such  mortgage and account to the agency therefor.    (10)  Notwithstanding  any  other  provision  of  law,  the  agency is  authorized to require, as a condition to  the  purchase  from  banks  of  existing  mortgages,  such  restrictions  upon  assumability of each new  mortgage as the agency may determine to be  necessary  or  desirable  to  assure  the  exemption from federal income taxes of the interest payable  on its bonds and notes. Such restrictions shall be  enforceable  by  the  originating  bank,  the agency, and any successor holder of the mortgage  unless expressly waived in writing by or on behalf of the agency.    (11) The agency shall maintain a continuous review of the availability  of funds in regular banking channels for  mortgages.  Except  as  stated  herein  with  respect to forward commitment mortgages and housing loans,  in the event that the agency shall determine that an adequate supply  of  funds  exists in regular banking channels for mortgages the agency shall  not authorize the issuance of bonds for the purchase of mortgages except  refunding bonds, until such time as the agency shall determine that  the  supply  of funds available for mortgages is again inadequate. The agency  shall notify the governor, the temporary president of  the  senate,  and  the  speaker  of  the  assembly  of  any  determination that there is an  inadequate supply of funds available for mortgages made by it under this  subdivision. Discontinuance by the agency of the purchase  of  mortgages  pursuant  to  a determination that an adequate supply of funds exists in  regular banking channels shall not constitute, or  in  any  way  effect,  termination  of the agency as provided in subdivision six of section two  thousand  four  hundred  three  of  this  title.   Notwithstanding   the  foregoing,  the  agency  may  issue  bonds  or  notes for the purpose of  furthering forward commitment mortgage  programs  described  in  section  twenty-four  hundred  five-b  of  this  title  and housing loan programs  described in section twenty-four hundred five-c of  this  title  if  the  agency  shall  determine  that such programs will increase the supply of  credit available for  new  residential  mortgages  and  new  residential  improvement  loans  at  carrying  charges  within the financial means of  persons and families of low or moderate income.    * NB Effective until July 16, 2011    * § 2405. Purchase of mortgages. (1) The purpose of the  agency  shall  be to purchase mortgages from banks within the state during periods when  there  is  an  inadequate supply of credit available for new residential  mortgage loans and to require such banks to invest an  amount  equal  to  the  proceeds  thereof  as  rapidly  as  possible  in  new  mortgages on  residential real property for family units within the state.    It is hereby found and declared that such  activities  by  the  agency  will alleviate a condition of affairs in this state which is contrary to  the  public health, safety and general welfare and which has constitutedin the past and from time to time in  the  future  can  be  expected  to  constitute  a  public  emergency.  It is further found and declared that  such purposes are in all respects for the benefit of the people  of  the  state  of  New  York  and  the agency shall be regarded as performing an  essential governmental function in carrying  out  its  purposes  and  in  exercising the powers granted by this title.    (2)  The agency shall purchase mortgages from banks at such prices and  upon such terms and conditions as it shall determine; provided, however,  that the total purchase price for all mortgages which the agency commits  to purchase from a bank at any one time shall in no event be  more  than  the total of the unpaid principal balances thereof.    (3)  (a)  The  agency  shall  require  as  a  condition of purchase of  mortgages from banks that such banks shall, within such period as may be  approved by the agency not in excess of ninety days of  receipt  of  the  purchase price, enter into written commitments to loan and shall, within  such  period  as  may be approved by the agency, loan an amount equal to  the entire purchase price of such mortgages on new mortgages within  the  state having such terms as the agency may prescribe.    (b)  (i)  The  proportionate  dollar  amount  of commitments from each  agency issue of bonds or notes used to purchase mortgages from banks  in  each  region  of the state, as such regions are set forth in subdivision  nine of section twenty-four hundred  twenty-six  of  this  title  shall,  subject  to  subparagraph  (ii)  hereof, reflect the proportion that the  number of families in each region bears to the number of families in the  state as a whole.    (ii) To the extent that the reasonable demand by banks in  any  region  is  insufficient  to  accommodate  the  proportion of an agency issue of  bonds or notes determined pursuant to subparagraph (i) hereof  for  such  region,  the  agency  shall use reasonable efforts to purchase mortgages  such that the excess funds from such region are  distributed  among  the  other  regions  in  proportion  to  the  relative  reasonable demand. In  determining reasonable demand, the agency shall  consider,  among  other  things,  historical  demand  for  mortgages  in such regions, the dollar  amount of offers by banks to  sell  mortgages  to  the  agency  and  the  reasonableness  of  such offers, considering the size, mortgage history,  total assets, liquidity and financial ability of the bank to conform  to  the  contract  of  sale  and the bank's record of compliance with agency  requirements.    (iii) The agency shall use its best efforts to the end that  not  less  than  one-sixth  in  dollar  amount  of new mortgages resulting from its  program  of  purchasing  mortgages  shall  be   on   newly   constructed  residences.  A  newly  constructed residence is defined as a one to four  family dwelling not previously occupied.    (iv) During the time that the  agency  is  accepting  offers  to  sell  mortgages  from  banks,  the  agency  shall  advertise, in newspapers of  general circulation within the state, the  fact  that  it  is  accepting  offers  from  banks, and such other information as the agency determines  to be helpful in generating maximum participation by banks and potential  mortgagors. All banks within each such region shall be  invited  by  the  agency  to  participate  in  the agency's purchase of mortgages from the  proceeds of the sale of each issue by the agency of its bonds and notes.  The allocation of the proceeds of each such agency issue among the banks  requesting  participation  within  each  region  shall,  to  the  extent  practicable,  maximize  the  number  of  banks  which  participate.  Any  commitment between the agency and a bank shall  require  that  the  bank  provide  the agency with such information, as may be deemed necessary by  the agency, for the agency to assure that the requirements of this title  or any other requirements imposed by the  agency  with  respect  to  thepurchase  of mortgages with the proceeds of any agency issue of bonds or  notes has been fulfilled.    (c)  No  commitment  to  loan  or  loan on a mortgage secured or to be  secured  by  a  multiple  dwelling  shall  satisfy  the  requirement  of  paragraph  (a)  of this subdivision unless the prior written approval of  such commitment shall have been obtained from the agency. The agency may  refuse to approve any commitment to lend on  such  a  multiple  dwelling  mortgage if so required by the terms of any bonding resolution and shall  not  approve any commitment to lend on such a multiple dwelling mortgage  if the approval thereof would increase the total dollar amount  of  such  commitments  on multiple dwelling mortgages approved by the agency to an  amount in excess of forty percent of the total  purchase  price  of  all  mortgages theretofor purchased by the agency pursuant to this section.    (4) In the case of individual borrowers, such new mortgages shall bear  interest  computed  in  accordance  with  section  5-501  of the general  obligations law (whether or not insured  or  guaranteed  by  the  United  States of America or any agency thereof) at a rate which does not exceed  the maximum interest rate, if any, set by the agency for such mortgages.  The  agency  may  set such a maximum interest rate chargeable individual  borrowers on such new loans, notwithstanding the maximum  interest  rate  fixed  by section 5-501 of the general obligations law, at the rate that  the mortgages purchased by the agency were discounted to yield  plus  an  interest differential, not in excess of one percent per annum, which the  agency from time to time shall determine to be adequate consideration to  induce  such  banks to sell existing mortgages to the agency and to loan  an amount equal to the proceeds on new mortgages in furtherance  of  the  purposes  of and subject to the conditions of this title. In the case of  corporate borrowers, such new mortgages shall bear interest  at  a  rate  not  substantially  lower  than  the  rate  of  interest  that banks are  charging at the time of commitment on  comparable  new  mortgage  loans.  Each  such  bank shall annually account and pay over to the agency or to  the New York state housing finance agency for deposit  in  and  for  the  purposes  of  the  low rent lease account as set forth in paragraphs (a)  and (b) of subdivision four  of  section  forty-four-a  of  the  private  housing finance law or any successor entity as the agency may direct, or  to  both  the  agency  and the New York state housing finance agency for  such deposit and purposes in such proportions as the agency may  direct,  an  amount  equal  to  the  difference  between  (a) the total amount of  interest (which shall include all charges to  individual  and  corporate  borrowers  that  would be treated as interest under section 5-501 of the  general obligations  law  and  any  regulations  of  the  banking  board  pursuant to section fourteen-a of the banking law) received by it during  the preceding year on all such new mortgages and (b) the total amount of  interest which such mortgages would have yielded if the interest thereon  had been at the maximum rate chargeable individual borrowers on such new  loans  plus  an  additional  interest differential, not in excess of one  percent per annum, determined by the agency to be adequate consideration  to induce participating banks to make new loans on multiple dwellings.    (5) The agency shall require the submission to it by  each  bank  from  which  the  agency  has purchased mortgages evidence satisfactory to the  agency of the making of new mortgage loans and of paying over to the low  rent lease account  as  required  by  this  section  and  in  connection  therewith  may,  through its employees or agents or those of the banking  department, inspect the books and records of any such bank.    (6) Compliance by any bank with the terms of  its  agreement  with  or  undertaking  to  the  agency  with respect to the making of any mortgage  loans and of paying over to the low rent lease account may  be  enforced  by decree of the supreme court. The agency may require as a condition ofpurchase  of mortgages from any national banking association the consent  of such association to the jurisdiction of the supreme  court  over  any  such proceeding. The agency may also require agreement by any bank, as a  condition  of  the agency's purchase of mortgages from such bank, to the  payment of penalties to the agency for violation  by  the  bank  of  its  undertakings  to  the agency, and such penalties shall be recoverable at  the suit of the agency.    (7) The agency shall  require  as  a  condition  of  purchase  of  any  mortgage  from  a bank that the bank represent and warrant to the agency  that    (a) the unpaid principal balance of the mortgage and the interest rate  thereon have been accurately stated to the agency;    (b) the amount of the unpaid  principal  balance  is  justly  due  and  owing;    (c)  the  bank  has  no  notice  of the existence of any counterclaim,  offset or  defense  asserted  by  the  mortgagor  or  his  successor  in  interest;    (d)  the  mortgage  is  evidenced  by  a bond or promissory note and a  mortgage document which has been properly recorded with the  appropriate  public official;    (e)  the mortgage constitutes a valid first lien or second lien on the  real property described to the agency  in  accordance  with  subdivision  five  of  section  twenty-four  hundred two of this part subject only to  real property taxes not yet due, installments  of  assessments  not  yet  due,  and  easements  and  restrictions of record which do not adversely  affect, to a material degree, the use or value of the real  property  or  improvements thereon;    (f)  the  mortgage  loan when made was lawful under the banking law or  federal law, whichever governs the affairs of the  bank,  and  would  be  lawful on the date of purchase by the agency if made by the bank on that  date in the amount of the then unpaid principal balance;    (g)  the  mortgagor  is  not  now  in  default  in  the payment of any  installment of principal or interest, escrow funds, real property  taxes  or  otherwise  in  the performance of his obligations under the mortgage  documents and has not to the knowledge of the bank been  in  default  in  the performance of any such obligation for a period of longer than sixty  days during the life of the mortgage, and    (h)  the  improvements to the mortgaged real property are covered by a  valid and subsisting policy of insurance issued by a company  authorized  by  the  superintendent of insurance to issue such policies in the state  of New York and providing fire and extended coverage to  an  amount  not  less  than  eighty percent of the insurable value of the improvements to  the mortgaged real property.    (8) Each bank shall be liable to the agency for any  damages  suffered  by  the  agency  by  reason  of the untruth of any representation or the  breach of any warranty and, in the event that any  representation  shall  prove  to be untrue when made or in the event of any breach of warranty,  the bank shall, at the option of the agency, repurchase the mortgage for  the original purchase  price  adjusted  for  amounts  subsequently  paid  thereon, as the agency may determine.    (9)  The agency need not require the recording of an assignment of any  mortgage purchased by it from a bank pursuant to this section and  shall  not be required to notify the mortgagor of its purchase of the mortgage.  The  agency  shall  not be required to inspect or take possession of the  mortgage documents if the bank from which the mortgage is  purchased  by  the  agency  shall enter a contract to service such mortgage and account  to the agency therefor.(10) The agency shall maintain a continuous review of the availability  of funds in regular banking channels for  new  mortgage  loans.  In  the  event  that  the agency shall determine that an adequate supply of funds  exists in regular banking channels for new  mortgage  loans  the  agency  shall  not authorize the issuance of bonds for the purchase of mortgages  except refunding bonds, until such time as the  agency  shall  determine  that  the  supply  of funds available for mortgages is again inadequate.  The agency shall notify the governor, the  temporary  president  of  the  senate,  and the speaker of the assembly of any determination that there  is an inadequate supply of funds available  for  mortgages  made  by  it  under  this subdivision. Discontinuance by the agency of the purchase of  mortgages pursuant to a determination that an adequate supply  of  funds  exists  in  regular banking channels shall not constitute, or in any way  effect, termination of the agency as  provided  in  subdivision  six  of  section two thousand four hundred three of this title.    * NB Effective July 16, 2011