This bill has been amended

Bill S4399-2013

Relates to the powers of the State of New York Mortgage Agency

Relates to the powers of the State of New York Mortgage Agency.

Details

Actions

  • May 8, 2013: ADVANCED TO THIRD READING
  • May 7, 2013: 2ND REPORT CAL.
  • May 6, 2013: 1ST REPORT CAL.543
  • Mar 26, 2013: REFERRED TO CORPORATIONS, AUTHORITIES AND COMMISSIONS

Meetings

Calendars

Votes

VOTE: COMMITTEE VOTE: - Corporations, Authorities and Commissions - May 6, 2013
Ayes (5): Ranzenhofer, Flanagan, Martins, Perkins, Squadron
Excused (1): Larkin

Memo

BILL NUMBER:S4399

TITLE OF BILL: An act to amend the public authorities law, in relation to the powers of the state of New York mortgage agency

Purpose of Bill:

This bill would (i) authorize the State of New York Mortgage Agency (SONYMA) to originate second mortgage loans that provide borrowers of SONYMA first mortgage loans with down payment and/or closing cost assistance under certain limited circumstances, and (ii) amend the definition of government sponsored enterprise (GSE).

Summary of provisions:

Section 1 of the bill expands the definition of "mortgage" in Public Authorities Law (PAL) § 2402(5) to include loans made by SONYMA and secured by mortgages secured by a second lien in cases where the second lien: (i) secures a mortgage loan purchased by SONYMA, and (ii) is made at the same time as a first lien securing a mortgage loan purchased by SONYMA pursuant to its programs or by a government sponsored enterprise.

Section 2 of the bill amends the definition of "government sponsored enterprise" set forth in PAL § 2402 (17) to include Government National Mortgage Association (Ginnie Mae).

Section 3 of the bill amends PAL § 2404 to renumber subsection (30) as subsection (31) and to add a new subsection (29) to grant SONYMA the power to originate loans secured by mortgages secured by a second lien in cases where the second lien: (i) secures a mortgage loan purchased by SONYMA, and (ii) is made at the same time as a first lien securing a mortgage loan purchased by SONYMA pursuant to its programs or by a government sponsored enterprise.

Section 4 of the bill provides for an immediate effective date.

Existing law:

SONYMA is only authorized to purchase second mortgages where the loan purchased by SONYMA and secured by mortgages secured by a second lien: (i) secures a mortgage loan purchased by SONYMA; and (ii) is made at the same time as a first lien securing a mortgage loan purchased by SONYMA pursuant to its programs or by a government sponsored enterprise. SONYMA does not currently have the authority to originate mortgages for second lien purposes.

Prior Legislative history:

Chapter 327 of the Laws of 2012 (S.6900/A.10049); Chapter 208 of the Laws of 2010 (S.6150-A/A.9149-A); and Chapter 432 of the Laws of 2009 (S.5551/A.5753).

Statement in support:

This bill would: (i) authorize SONYMA to originate mortgages subordinate to a first lien where the second mortgage is made

simultaneously and with respect to the same secured property as a first mortgage that is purchased by SONYMA or purchased or securitized by a GSE; and (ii) expand the definition of GSE to include the Ginnie Mae.

The ability of SONYMA, and other issuers of mortgage revenue bonds, to fund mortgage programs by borrowing in the tax-exempt markets has been negatively impacted by the Federal Reserve Board's (FRB) ongoing policy of subsidizing interest rates through the purchase of mortgage-backed securities (MBS) to support the US economic recovery. Thus, the FRB's policy has eliminated SONYMA's traditional interest rate advantage over conventional and FHA fixed-rate mortgage products.

These events have led the Agency to look to alternative fixed-rate funding sources beyond the capital markets. In 2010, legislation was passed authorizing SONYMA to purchase second loans made simultaneously as first loans purchased by GSEs. SONYMA can now purchase closing cost and/or down payment assistance loans in connection with non-SONYMA first mortgage loans made at the same time, and purchased or securitized by the GSEs. The legislation has enabled the Agency to launch a conventional mortgage program in partnership with Fannie Mae, whereby eligible New York home buyers and home owners can take advantage of special pricing and certain underwriting advantages offered by Fannie Mae to state housing agencies like SONYMA. The program features a second mortgage where SONYMA provides down payment and/or closing cost assistance.

SONYMA would like to expand its conventional rate program to include loans insured by FHA and securitized by Ginnie Mae. FHA-insured loans offer lower interest rates and more flexible underwriting than the Fannie Mae loans. When offered with SONYMA. down payment and/or closing cost assistance, the FHA product will be extremely attractive to New Yorkers. However, HUD interprets the Housing and Economic Recovery Act of 2008 (HERA) as prohibiting SONYMA from providing secondary financing on FHA loans when "agents, including nonprofit or for-profit enterprises, make the second lien, regardless of the source of funds". Thus, under current law SONYMA's SONYMA can only purchase loans, not originate them does not, in HUD's view, permit SONYMA to expand its conventional rate program to include FHA insured loans, since under SONYMA's current law, the lender must originate the secondary loan, which SONYMA subsequently purchases.

Unless SONYMA is given authority to make second loans in conjunction with the programs it offers, it will not be able to take advantage of the FHA program to assist New York homebuyers and homeowners.

Further, to make the FHA program economically feasible, SONYMA needs the ability to sell loans to or securitize loans with Ginnie Mae. In order to do this, the Agency needs to expand the definition of "government sponsored enterprise" in its statute to include Ginnie Mae. This definition was inserted in SONYMA's statute when SONYMA received legislative approval in 2010 to purchase second loans in connection with programs involving government sponsored enterprises, such as Fannie Mae, which though privately owned are publicly chartered. Ginnie Mae does not fit within this definition, since it is a wholly owned government corporation whose mortgage-backed securities

are backed by the full faith and credit guaranty of the United States government.

Budget implications:

None.

Local Impact:

None.

Effective Date:

The bill would take effect immediately.


Text

STATE OF NEW YORK ________________________________________________________________________ 4399 2013-2014 Regular Sessions IN SENATE March 26, 2013 ___________
Introduced by Sen. YOUNG -- (at request of the Division of Housing & Community Renewal) -- read twice and ordered printed, and when printed to be committed to the Committee on Corporations, Authorities and Commissions AN ACT to amend the public authorities law, in relation to the powers of the state of New York mortgage agency THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subdivision 5 of section 2402 of the public authorities law, as amended by section 1 of chapter 208 of the laws of 2010, is amended to read as follows: (5) "Mortgage". A loan owed to a bank secured by a first lien on a fee simple or leasehold estate in real property located in the state and improved by a residential structure, whether or not insured or guaran- teed by the United States of America or any agency thereof. The term "mortgage" shall also include a loan owed to a bank secured by a second lien on a fee simple or leasehold estate in real property located in the state and improved by a residential structure, whether or not insured or guaranteed by the United States of America or any agency thereof, provided, however, that such second lien: (a) secures a loan purchased by the agency, and (b) is made at the same time as a first lien securing a loan purchased by the agency pursuant to its programs or by a govern- ment sponsored enterprise or is made at the same time as a new housing loan purchased by the agency pursuant to section twenty-four hundred five-c of this part[, provided that, in]. THE TERM "MORTGAGE" SHALL ALSO INCLUDE LOANS MADE BY THE AGENCY AND SECURED BY MORTGAGES SECURED BY A SECOND LIEN IN CASES WHERE THE SECOND LIEN: (I) SECURES A MORTGAGE LOAN PURCHASED BY THE AGENCY, AND (II) IS MADE AT THE SAME TIME AS A FIRST LIEN SECURING A MORTGAGE LOAN PURCHASED BY THE AGENCY PURSUANT TO ITS PROGRAMS OR BY A GOVERNMENT SPONSORED ENTERPRISE. IN the case of any second lien PURCHASED OR MADE HEREUNDER, the mortgagor shall be obli-
gated to contribute from his or her own verifiable funds an amount not less than such percentage as the agency shall determine, of the lower of the purchase price or appraised value of the property subject to the first lien. "Real property" as used in this subdivision shall include air rights. For the purposes of this title and of section one hundred ninety and subsection (a) of section one thousand four hundred fifty-six of the tax law, "mortgage" shall include housing loans as defined below. Except for the purposes of subdivision seven of section two thousand four hundred five and subdivision eight of section two thousand four hundred five-b of this part, "mortgage" shall also include a loan owed to a bank by an individual borrower incurred for the purpose of financing the purchase of certificates of stock or other evidence of ownership of an interest in, and a proprietary lease from, a cooperative housing corporation formed for the purpose of the cooperative ownership of residential real estate in the state, secured by an assignment or transfer of the bene- fits of such cooperative ownership, and containing such terms and condi- tions as the agency may approve. S 2. Subdivision 5 of section 2402 of the public authorities law, as amended by section 2 of chapter 208 of the laws of 2010, is amended to read as follows: (5) "Mortgage". A loan owed to a bank secured by a first lien on a fee simple or leasehold estate in real property located in the state and improved by a residential structure, whether or not insured or guaran- teed by the United States of America or any agency thereof. The term "mortgage" shall also include a loan owed to a bank secured by a second lien on a fee simple or leasehold estate in real property located in the state and improved by a residential structure, whether or not insured or guaranteed by the United States of America or any agency thereof, provided, however, that such second lien: (a) secures a loan purchased by the agency, and (b) is made at the same time as a first lien securing a loan purchased by the agency pursuant to its programs or by a govern- ment sponsored enterprise or is made at the same time as a new housing loan purchased by the agency pursuant to section twenty-four hundred five-c of this part[, provided that, in]. THE TERM "MORTGAGE" SHALL ALSO INCLUDE LOANS MADE BY THE AGENCY AND SECURED BY MORTGAGES SECURED BY A SECOND LIEN IN CASES WHERE THE SECOND LIEN: (I) SECURES A MORTGAGE LOAN PURCHASED BY THE AGENCY, AND (II) IS MADE AT THE SAME TIME AS A FIRST LIEN SECURING A MORTGAGE LIEN PURCHASED BY THE AGENCY PURSUANT TO ITS PROGRAMS OR BY A GOVERNMENT SPONSORED ENTERPRISE. IN the case of any second lien PURCHASED OR MADE HEREUNDER, the mortgagor shall be obli- gated to contribute from his or her own verifiable funds an amount not less than such percentage as the agency shall determine, of the lower of the purchase price or appraised value of the property subject to the first lien. "Real property" as used in this subdivision shall include air rights. Except for the purposes of subdivision seven of section two thousand four hundred five of this part, "mortgage" shall also include a loan owed to a bank by an individual borrower incurred for the purpose of financing the purchase of certificates of stock or other evidence of ownership of an interest in, and a proprietary lease from, a cooperative housing corporation formed for the purpose of the cooperative ownership of residential real estate in the state, secured by an assignment or transfer of the benefits of such cooperative ownership, and containing such terms and conditions as the agency may approve.
S 3. Subdivision 5 of section 2402 of the public authorities law, as amended by chapter 432 of the laws of 2009, is amended to read as follows: (5) "Mortgage". A loan owed to a bank secured by a first lien on a fee simple or leasehold estate in real property located in the state and improved by a residential structure, whether or not insured or guaran- teed by the United States of America or any agency thereof. The term "mortgage" shall also include a loan owed to a bank secured by a second lien on a fee simple or leasehold estate in real property located in the state and improved by a residential structure, whether or not insured or guaranteed by the United States of America or any agency thereof, provided, however, that such second lien: (a) secures a loan purchased by the agency, and (b) is made at the same time as a first lien securing a loan purchased by the agency pursuant to its programs or is made at the same time as a new housing loan purchased by the agency pursuant to section twenty-four hundred five-c of this part[, provided that, in]. THE TERM "MORTGAGE" SHALL ALSO INCLUDE LOANS MADE BY THE AGENCY AND SECURED BY MORTGAGES SECURED BY A SECOND LIEN IN CASES WHERE THE SECOND LIEN: (I) SECURES A MORTGAGE LOAN PURCHASED BY THE AGENCY, AND (II) IS MADE AT THE SAME TIME AS A FIRST LIEN SECURING A MORTGAGE LIEN PURCHASED BY THE AGENCY PURSUANT TO ITS PROGRAMS OR BY A GOVERNMENT SPONSORED ENTERPRISE. IN the case of any second lien, the mortgagor shall be obli- gated to contribute from his or her own verifiable funds an amount not less than such percentage as the agency shall determine, of the lower of the purchase price or appraised value of the property subject to the first lien. "Real property" as used in this subdivision shall include air rights. Except for the purposes of subdivision seven of section two thousand four hundred five of this part, "mortgage" shall also include a loan owed to a bank by an individual borrower incurred for the purpose of financing the purchase of certificates of stock or other evidence of ownership of an interest in, and a proprietary lease from, a cooperative housing corporation formed for the purpose of the cooperative ownership of residential real estate in the state, secured by an assignment or transfer of the benefits of such cooperative ownership, and containing such terms and conditions as the agency may approve. S 4. Subdivision 17 of section 2402 of the public authorities law, as added by chapter 208 of the laws of 2010, is amended to read as follows: (17) "Government sponsored enterprises". Privately owned, publicly chartered entities, AND WHOLLY-OWNED CORPORATE INSTRUMENTALITIES OF THE UNITED STATES WITHIN THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, created by Congress to encourage lending and reduce costs primarily in the housing sector of the economy. S 5. Subdivision 30 of section 2404 of the public authorities law, as renumbered by chapter 229 of the laws of 2007, is renumbered subdivision 31 and a new subdivision 30 is added to read as follows: (30) TO MAKE LOANS SECURED BY MORTGAGES SECURED BY A SECOND LIEN IN CASES WHERE THE SECOND LIEN: (I) SECURES A MORTGAGE LOAN PURCHASED BY THE AGENCY, AND (II) IS MADE AT THE SAME TIME AS A FIRST LIEN SECURING A MORTGAGE LOAN PURCHASED BY THE AGENCY PURSUANT TO ITS PROGRAMS OR BY A GOVERNMENT SPONSORED ENTERPRISE. S 6. This act shall take effect immediately, provided that the amend- ments to subdivision 5 of section 2402 of the public authorities law made by section one of this act shall be subject to the expiration and reversion of such subdivision pursuant to section 16 of chapter 915 of the laws of 1982, as amended, when upon such date the provisions of
section two of this act shall take effect; provided further, that the amendments to subdivision 5 of section 2402 of the public authorities law made by section two of this act shall be subject to the expiration and reversion of such subdivision pursuant to section 4 of chapter 208 of the laws of 2010 as amended, when upon such date the provisions of section three of this act shall take effect; provided further, that the amendments to subdivision 17 of section 2402 made by section four of this act shall not affect the repeal of such subdivision and shall be deemed repealed therewith.

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