Bill S5396-2011

Relates to powers of the agency; allows agency to exercise powers when its obligations are purchased by certain financial institutions

Relates to powers of the agency; allows agency to exercise powers when its obligations are purchased by certain financial institutions.

Details

Actions

  • Sep 23, 2011: SIGNED CHAP.575
  • Sep 12, 2011: DELIVERED TO GOVERNOR
  • Jun 23, 2011: returned to senate
  • Jun 23, 2011: passed assembly
  • Jun 23, 2011: ordered to third reading rules cal.613
  • Jun 23, 2011: substituted for a7641
  • Jun 16, 2011: referred to housing
  • Jun 16, 2011: DELIVERED TO ASSEMBLY
  • Jun 16, 2011: PASSED SENATE
  • Jun 1, 2011: ADVANCED TO THIRD READING
  • May 25, 2011: 2ND REPORT CAL.
  • May 24, 2011: 1ST REPORT CAL.824
  • May 17, 2011: REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT

Meetings

Calendars

Votes

VOTE: COMMITTEE VOTE: - Housing, Construction and Community Development - May 24, 2011
Ayes (7): Young, Bonacic, Gallivan, Grisanti, Ritchie, Diaz, Krueger
Nays (1): Espaillat

Memo

BILL NUMBER:S5396

TITLE OF BILL: An act to amend the private housing finance law, in relation to powers of the agency

PURPOSE OR GENERAL IDEA OF BILL: To provide statutory authority for HDC and HFA to issue unrated bonds for private placement beyond the provision of financing to entities separately regulated under the Private Housing Finance Law.

SUMMARY OF SPECIFIC PROVISIONS:

Sections 1 & 2: Expands the statutory authority beyond the provisions of financing to entities already regulated by current law.

Section 3: Effective Date

JUSTIFICATION: Changes in the 421(a) real estate tax abatement program in New York City have made the tax-exempt bond program the only viable way to finance much needed mixed-income and affordable rental housing. Not only is the use of this below-market financing critical to creating much needed housing in New York City, but these large new construction projects create numerous construction and permanent jobs.

Currently, in order to use tax-exempt bond financing, long term credit enhancement and variable rate bond liquidity must be provided. To date, Fannie Mae and Freddie Mac have been the primary providers of this credit enhancement and liquidity.

This type of credit enhancement enables the underlying bonds to obtain greater than an investment grade rating which is the minimum rating currently required under the applicable provisions of the mixed income and affordable program powers of the New York State Housing Finance Agency ("HFA") and the New York City Housing Development Corporation ("HDC"). In light of the current uncertainty regarding the future operations of both Fannie Mae and Freddie Mac, it may be necessary to utilize alternative structures to obtain credit enhancement for the bonds issued to finance this much needed rental housing. One current financing structure that is used by other issuers in New York State and other states permits the issuance of unrated bonds which are purchased by a financial institution.

Under this structure, the real estate credit risk is assumed by the financial institution as is the case with a Fannie Mae or Freddie Mac credit enhancement. Consequently, the financial institution is incentivized to carefully underwrite the viability of the project to ensure that its investment remains stable. By amending the powers of HFA and HDC as set forth in this bill, both HFA and HDC would have the flexibility to issue bonds in accordance with this structure which would enable the developers of these type of projects to have an additional financing alternative without imposing credit risks on HFA and HDC.

More importantly, should Fannie Mae or Freddie Mac no longer provide bond credit enhancements, this structure may provide the only viable financing option.

Loans financed with proceeds of unrated HFA and HDC bonds issued for private placement offer cost efficiencies to their borrowers. Without the involvement of rating agencies, outside underwriters, credit enhancers and their respective legal counsels, private placement transactions can be completed at a substantially lower cost to the borrower. These savings are particularly important to smaller 100% affordable projects, for which the cost of issuance of a public offering are often prohibitively expensive. Additionally, by continuing to find vehicles to encourage the development of housing, this method of financing will stimulate job creation throughout the State.

Private placement of bonds to finance affordable housing is a proven method of financing for certain local banks in New York. However, HFA and HDC do not currently have statutory authority to issue unrated bonds for private placement beyond the provision of financing to entities separately regulated under the Private Housing Finance Law.

PRIOR LEGISLATIVE HISTORY: New Bill.

EFFECTIVE DATE: This act shall take effect immediately, with provisions.


Text

STATE OF NEW YORK ________________________________________________________________________ 5396 2011-2012 Regular Sessions IN SENATE May 17, 2011 ___________
Introduced by Sens. LIBOUS, YOUNG -- read twice and ordered printed, and when printed to be committed to the Committee on Housing, Construction and Community Development AN ACT to amend the private housing finance law, in relation to powers of the agency THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Paragraph 3 of subdivision 29-a of section 44 of the private housing finance law, as amended by chapter 474 of the laws of 1987, is amended to read as follows: (3) The powers granted by this subdivision may be exercised only if (a) obligations of the agency have been issued to fund the loan made or purchased by the agency and such obligations have received an investment grade rating from a recognized rating agency [or]; (b) the loan made or purchased by the agency is fully secured as to principal and interest by insurance or a commitment to insure issued by the state of New York mortgage agency or by the general credit of a bank, national bank, trust company, savings bank, savings and loan association, insurance company, governmental agency of the United States, or any combination thereof; OR (C) OBLIGATIONS OF THE AGENCY ARE PURCHASED BY A BANK, NATIONAL BANK, TRUST COMPANY, SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, INSURANCE COMPANY, GOVERNMENTAL AGENCY OF THE UNITED STATES, OR ANY WHOLLY-OWNED SUBSIDIARY OR COMBINATION THEREOF. S 2. Paragraph 3 of subdivision 23-c of section 654 of the private housing finance law, as added by chapter 702 of the laws of 1992, is amended to read as follows: (3) The powers granted by this subdivision may be exercised only if (a) obligations of the corporation have been issued to fund the loan made or purchased by the corporation and such obligations have received an investment grade rating from a recognized rating agency [or]; (b) the loan made or purchased by the corporation is fully secured as to princi-
pal and interest by insurance or a commitment to insure by the state of New York mortgage agency or New York city residential mortgage insurance corporation or by the general credit of a bank, national bank, trust company, savings bank, savings and loan association, insurance company, governmental agency of the United States, or any combination thereof; OR (C) OBLIGATIONS OF THE CORPORATION ARE PURCHASED BY A BANK, NATIONAL BANK, TRUST COMPANY, SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, INSUR- ANCE COMPANY, GOVERNMENTAL AGENCY OF THE UNITED STATES, OR ANY WHOLLY-OWNED SUBSIDIARY OR COMBINATION THEREOF. S 3. This act shall take effect immediately; provided, however that the amendments to subdivision 29-a of section 44 of the private housing finance law made by section one of this act shall not affect the repeal of such subdivision and shall be deemed repealed therewith; and provided, further, that the amendments to subdivision 23-c of section 654 of the private housing finance law made by section two of this act shall not affect the repeal of such subdivision and shall be deemed repealed therewith.

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