N.Y. Priv. Hous. Fin. Law § 304

Current through 2024 NY Law Chapter 443

Section 304 - Purposes, powers and operation

1. The purpose of the corporation shall be to assist, promote, encourage and stimulate the development and rehabilitation of blighted areas by rendering financial assistance in the construction, rehabilitation or purchase of housing accommodations in blighted or deteriorating urban areas in this state by making first mortgage loans in areas designated by the corporation, such loans to be made on a sound economic basis by the application of sound mortgage lending principles.

2. It is not the intention or the purpose of the powers herein granted to take from banking or insurance organizations any such loans or commitments as may be desired by such organizations generally in the ordinary course of their business; provided however, that the corporation need not make any specific inquiry or find as a fact that any banking or insurance organization desires to make any such loan.

3. In furtherance of the purpose set forth in subdivision one of this section, and in addition to the powers conferred on stock corporations by general laws, the corporation shall, subject to the restrictions and limitations contained in this article, have the following powers:

(a) To issue and sell for cash capital stock of the corporation.

(b) To issue and sell its debentures bearing such interest rates and having such maturities and other terms and provisions as may be determined by the board of directors of the corporation.

(c) To invest in bonds and mortgages or notes and mortgages upon improved and unencumbered real property in areas in this state designated by the board of directors of the corporation as blighted, over-crowded, or deteriorating areas, subject to the following conditions:

(i) The board of directors shall be satisfied with respect to each loan that it is economically sound.

(ii) No such loan shall be in an amount in excess of eighty per centum of the corporation's appraised value of such real property, except that such loan may exceed eighty per centum when guaranteed or insured by the federal government or any agency thereof.

(iii) Any appraisal of such property shall be based on its long-term economic value with due consideration being given, among other factors, to its physical maintenance and, in the case of income-producing properties, to its stabilized rental value after adequate vacancy allowances. Except in cases of new construction no appraisal of an income-producing property shall be undertaken by the corporation unless it has first been supplied by the loan applicant with a current rent roll and statement of income and expense for the twelve-month period preceding the date of the loan application, certified by such loan applicant and in form and substance satisfactory to the corporation.

(iv) No loan shall be made on any existing housing accommodation unless (a) such housing accommodation is in physical condition satisfactory to the corporation or (b) the loan applicant is committed to restore such housing accommodation to satisfactory condition prior to the loan closing, or, at the discretion of the corporation, within a specified period after closing, out of the proceeds of the loan.

(v) No loan shall be made on a housing accommodation unless (a) such housing accommodation has a suitable heating system satisfactory to the corporation, or (b) the loan applicant is committed to install suitable heating facilities out of the proceeds of such loan.

(vi) Any such loan shall be for one or more of the following purposes only:

A. To finance the improvement or rehabilitation of an existing housing accommodation.

B. To consolidate, refinance or liquidate existing mortgage indebtedness on a housing accommodation.

C. To finance the bona fide purchase of a housing accommodation, provided that except in cases of loans insured or guaranteed by the federal government or any agency thereof, the purchaser of the real property which is to constitute the security for the proposed loan has paid to the seller in cash an amount equal to at least twenty per centum of the purchase price of such real property.

D. To finance the construction of new housing accommodations.

(vii) The board of directors of the corporation shall cause to be included in each mortgage the following protective provisions and restrictions (in addition to those contained in the statutory form M mortgage with lien covenant as contained in section two hundred fifty-eight of the real property law), provided that any and all of the said provisions and restrictions may be waived by the corporation where the corporation is purchasing or otherwise acquiring an already existing mortgage:

A. A provision requiring the mortgagor to obtain the prior written consent of the holder of the first mortgage to the creation of any junior liens, charges or encumbrances affecting the real property. In its sole and absolute discretion the corporation may modify or waive the inclusion of this provision in any mortgage.

B. A provision requiring the mortgagor to accumulate and maintain with the holder of the first mortgage, so long as the mortgage is held by it, a fund for the proper repair and maintenance of the mortgaged premises. The amount and type of such fund and conditions under which it shall be accumulated, applied and replenished shall be specified in the mortgage. Such fund may be applied from time to time to the repair or maintenance of the property by the mortgagor with the written consent of the holder of the first mortgage. Such fund shall be applied by the mortgagor at the direction of such holder, when such application is deemed necessary by such holder for the reasonable protection of the property. In its sole and absolute discretion the corporation may waive the inclusion of this provision in any mortgage.

C. A provision permitting the mortgagor to repay the principal amount of the loan or any part thereof at any time without penalty, except that the mortgage may, in the discretion of the board of directors, contain a provision for a prepayment penalty not exceeding two per centum of any amount repaid within three years after the closing of the loan in addition to such regular repayments without penalty as may be provided in the mortgage.

(viii) No loan shall be made by the corporation unless the real property which is to secure such loan is, or upon application of the loan proceeds will be, unencumbered, and the corporation shall have been furnished with satisfactory evidence that such real property is or upon application of the loan proceeds will be in compliance with all applicable laws, ordinances and regulations of governments, whether federal, state, county or municipal, or agencies or instrumentalities thereof, having jurisdiction.

(ix) Such other and further conditions as the board of directors in its sole and absolute discretion may deem advisable in the interest of conducting the affairs of the corporation in accordance with sound economic and mortgage lending principles.

(x) The mortgage shall provide that violation of any of the foregoing conditions by the mortgagor shall constitute an event of default, entitling the holder of the first mortgage to accelerate maturity of the mortgage obligation.

(xi) The mortgage shall provide for maturity of the loan and amortization thereof at such rate as shall be deemed appropriate by the board of directors in accordance with sound mortgage lending practice, provided that except in cases of loans insured or guaranteed by the federal government or any agency thereof, no mortgage shall have a maturity in excess of twenty years from the date of closing.

(xii) The enumeration herein, or in any lending rules or regulations promulgated by the corporation, of conditions or criteria relating to the granting of any mortgage loan shall impose no obligation on the corporation to grant any application for a loan which fulfills such conditions or criteria. The authority of the corporation to decline any loan application for any reason whatsoever shall be absolute and unconditional.

(xiii) Nothing contained in this article shall be construed as signifying a legislative intent to define what constitutes prudent lending practice for banking, insurance or other organizations.

(d) To sell without recourse bonds and mortgages or notes and mortgages acquired pursuant to subdivision three (c) of this section, at such prices and upon such terms and conditions as the board of directors of the corporation shall determine; to service or continue to service such bonds and mortgages and to manage such properties for any of its members, provided that if the purchaser be a member, the said bond and mortgage or note and mortgage is in all respects eligible for investment by the particular member purchasing the same.

(e) To acquire, subscribe for, own, hold, sell, assign, transfer, pledge or otherwise dispose of obligations of the United States with maturities not in excess of three years.

(f) For the purpose of protecting its interests, to release any obligation to pay or guarantee the payment of principal or interest, or otherwise to waive or modify any of the terms and conditions of any bond and mortgage, and of any note and mortgage, and to extend or re-extend any bond and mortgage, and any note and mortgage, and to accept a sum less than the principal amount thereof in the full payment and satisfaction of the same.

(g) In addition to interest rates within legal limits the corporation may impose a service charge upon the mortgagor or owner which shall not exceed two per centum of the total amount of the loan.

(h) To apply for status as an approved mortgagee under the national housing act and to act as a mortgagee under said act.

4. The corporation shall have the power to purchase, receive, hold, lease or otherwise acquire, and to sell, convey, mortgage, lease, pledge or otherwise dispose of, upon such terms and conditions as its board of directors may deem advisable, real and personal property, together with such rights and privileges as may be incidental and appurtenant thereto and the use thereof, including, but not restricted to, any real or personal property acquired by such corporation, from time to time in the satisfaction of debts or enforcement of obligations, provided that the corporation may purchase or acquire only the following real estate:

(a) Plots whereon there are or may be erected buildings suitable for the convenient transaction of the business of the corporation.

(b) Such real property as shall be conveyed to it in satisfaction of debts previously contracted in the course of its business.

(c) Such real estate as it shall purchase at sales under judgments, decrees or mortgages held by it.

(d) In lieu of instituting an action to foreclose a mortgage lien, the corporation may purchase a deed to the underlying real property.

N.Y. Priv. Hous. Fin. Law § 304