Bill S763-2011

Authorizes the establishment of the home equity protection insurance program

Authorizes the establishment of the home equity protection insurance program directing the agency to issue a commitment to insure and insure the full value of certain residences which are owner-occupied by persons who meet certain income qualifications.

Details

Actions

  • Jan 4, 2012: REFERRED TO CORPORATIONS, AUTHORITIES AND COMMISSIONS
  • Jan 5, 2011: REFERRED TO CORPORATIONS, AUTHORITIES AND COMMISSIONS

Memo

BILL NUMBER:S763

TITLE OF BILL:

An act to amend the public authorities law, in relation to establishing a home equity protection insurance program

PURPOSE:

To authorize the State of New York Mortgage Agency to institute a home equity protection insurance program whereby the agency will insure the value of residential real property against any loss thereof upon resale of the property.

SUMMARY OF PROVISIONS:

This bill adds a new subdivision (30) to Section 2404 of the Public Authorities Law and a new 2405-f to authorize the State of New York Mortgage Agency (SONYMA) to establish and administer a home equity protection insurance program. Under the program the agency would insure the full value of an owner-occupied one-to-four family residence, including a condominium or a cooperative. This program would be restricted to middle-and low-income persons who meet the income qualification threshold for a SONYMA forward commitment mortgage. They would not have to obtain a SONYMA mortgage to be eligible for the home equity protection insurance program. The insured value of the residential real property would be determined by either its purchase price, the purchase price plus the cost of rehabilitation or an appraisal. The insurance would become effective upon payment of a premium that shall be determined by SONYMA. The insured homeowner could collect on the policy if upon resale of the real property the sales price is less than the insured amount (i.e. the original purchase price) provided that the loss in value is not predominantly from the owner's neglect of the property's physical condition. In addition, in order to be eligible to collect for any decrease in the policy holder/owner must have lived in the insured residence for a minimum of three years. The bill also provides that SONYMA must create a home equity protection insurance fund into which it must deposit any moneys which may be available to the agency from any source, including revenues received from insurance premiums for the payment of any liabilities under the home equity protection insurance program. It also requires the agency to maintain in the fund a reserve equaling at least 20% of the total amounts insured. Finally, the bill delineates the types of investments in which the agency may invest the fund's moneys. These investments correspond statutorily to the ones authorized for the agency's mortgage insurance fund.

JUSTIFICATION:

This bill reflects an attempt to provide homeowners with the confidence to invest and live in areas of the state that have experienced depressed residential real property prices. These areas include upstate cities, parts of New York City, and rural areas. The bill is modeled after a municipal program in Syracuse which was

developed to help reverse that city's housing decline. By guaranteeing that homeowners will never lose their equity investment if they purchase home equity protection insurance, the bill is designed to help protect low and moderate income homeowners from the vagaries of the real estate market. Since SONYMA 'already provides mortgage insurance for aggregates of its forward commitment housing mortgages, it represents the ideal agency to initiate and manage the home equity protection program.

LEGISLATIVE. HISTORY:

2009-10: S.1095/A.4521 Referred to Corporations, Authorities, and Commissions 2007-08: S.356/A.4185 Referred to Corporations, Authorities, and Commissions 2006: S.6249/A.9606 Referred to Corporations, Authorities, and Commissions 2005: A.2748/S.6249 Referred to Corporations, Authorities, and Commissions 2003-04: A.6486 Referred to Corporations, Authorities, and Commissions

FISCAL IMPLICATIONS:

None.

EFFECTIVE DATE:

One hundred eighty days after it becomes law.


Text

STATE OF NEW YORK ________________________________________________________________________ 763 2011-2012 Regular Sessions IN SENATE (PREFILED) January 5, 2011 ___________
Introduced by Sen. YOUNG -- 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 establishing a home equity protection insurance program THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. 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 ESTABLISH AND ADMINISTER A HOME EQUITY PROTECTION INSURANCE PROGRAM IN ACCORDANCE WITH SECTION TWENTY-FOUR HUNDRED FIVE-F OF THIS PART. S 2. The public authorities law is amended by adding a new section 2405-f to read as follows: S 2405-F. HOME EQUITY PROTECTION INSURANCE PROGRAM. (1) THE AGENCY IS HEREBY DIRECTED, TO THE EXTENT IT FINDS PRACTICABLE, TO ESTABLISH A HOME EQUITY PROTECTION INSURANCE PROGRAM WHEREBY IT WILL ISSUE A COMMITMENT TO INSURE AND INSURE THE FULL VALUE OF A ONE-TO-FOUR FAMILY RESIDENCE, INCLUDING A CONDOMINIUM AND A COOPERATIVE, THAT IS OWNER-OCCUPIED BY ANY PERSON OR PERSONS WHO MEET THE INCOME QUALIFICATIONS FOR A FORWARD COMMITMENT MORTGAGE PURSUANT TO SECTION TWENTY-FOUR HUNDRED FIVE-B OF THIS PART. THE FULL VALUE OF THE RESIDENTIAL REAL PROPERTY SHALL BE DETERMINED BY EITHER ITS PURCHASE PRICE, THE PURCHASE PRICE PLUS THE COST OF ANY REHABILITATION TO THE RESIDENCE, OR AN APPRAISAL. THE INSUR- ANCE SHALL BE ISSUED BY THE AGENCY AFTER THE PURCHASE OR THE REHABILI- TATION OF THE REAL PROPERTY UPON PAYMENT OF A PREMIUM THAT THE AGENCY SHALL DETERMINE. (2) UPON THE SALE OF THE RESIDENTIAL REAL PROPERTY THAT IS INSURED BY THE AGENCY THROUGH ITS HOME EQUITY INSURANCE PROGRAM, THE AGENCY SHALL
PAY THE POLICY HOLDER/OWNER THE DIFFERENCE BETWEEN THE FACE VALUE OF THE INSURANCE POLICY AND THE SALES PRICE OF THE INSURED PREMISES IF SUCH SALES PRICE IS LESS THAN THE INSURED AMOUNT AND IF THE POLICY HOLDER/OWNER HAS LIVED IN THE PREMISES FOR A PERIOD OF NOT LESS THAN THREE YEARS. THE AGENCY SHALL ESTABLISH PROCEDURES TO BE FOLLOWED BY A POLICY HOLDER/OWNER IN THE EVENT OF A PAYMENT UNDER THE TERMS OF ANY HOME EQUITY PROTECTION INSURANCE POLICY. THE AGENCY SHALL NOT BE REQUIRED TO PAY ON A CLAIM FOR A LOSS OF EQUITY IF IT DETERMINES THAT SUCH LOSS OCCURRED PREDOMINANTLY FROM THE POLICY HOLDER/OWNER'S NEGLECT OF THE REAL PROPERTY'S PHYSICAL CONDITION. (3)(A) THE AGENCY SHALL CREATE A HOME EQUITY PROTECTION INSURANCE FUND TO BE USED AS A REVOLVING FUND FOR CARRYING OUT THE PROVISIONS OF THIS SECTION WITH RESPECT TO RESIDENTIAL REAL PROPERTY INSURED THEREUNDER. THE AGENCY SHALL PAY INTO SUCH FUND ALL MONEYS WHICH MAY BE AVAILABLE TO THE AGENCY FOR THE PURPOSES OF SUCH FUND FROM ANY SOURCE, INCLUDING BUT NOT LIMITED TO THE MONEYS RECEIVED FROM PREMIUMS DERIVED FROM THE ISSU- ANCE OF HOME EQUITY PROTECTION INSURANCE POLICIES. (B) THE AGENCY SHALL MAINTAIN IN THE EQUITY INSURANCE FUND AS A RESERVE AN AMOUNT OF MONEY OR CASH EQUIVALENTS EQUAL TO NO LESS THAN TWENTY PERCENT OF THE AMOUNTS INSURED UNDER THE AGENCY'S HOME EQUITY PROTECTION INSURANCE CONTRACTS. (4) MONEYS IN SUCH FUND MAY BE INVESTED (A) IN SPECIAL TIME DEPOSIT ACCOUNTS IN, OR CERTIFICATES OF DEPOSIT ISSUED BY, A BANK, TRUST COMPA- NY, SAVINGS BANK OR SAVINGS AND LOAN ASSOCIATION LOCATED AND AUTHORIZED TO DO BUSINESS IN THIS STATE; PROVIDED, HOWEVER, THAT SUCH TIME DEPOSIT ACCOUNT OR CERTIFICATE OF DEPOSIT SHALL BE PAYABLE WITHIN SUCH TIME AS THE PROCEEDS MAY BE NEEDED TO MEET EXPENDITURES ESTIMATED TO BE INCURRED BY THE AGENCY AND PROVIDED FURTHER THAT SUCH TIME DEPOSIT ACCOUNT OR CERTIFICATE OF DEPOSIT BE SECURED BY A PLEDGE OF OBLIGATIONS OF THE UNITED STATES OF AMERICA OR OBLIGATIONS OF THE STATE, ANY CITY OF THE STATE, OR OTHER MUNICIPAL CORPORATION, SCHOOL DISTRICT OR DISTRICT CORPORATION OF THE STATE OR OBLIGATIONS OF AGENCIES OF THE FEDERAL GOVERNMENT; OR (B) IN OBLIGATIONS OF THE UNITED STATES OF AMERICA OR THE STATE WHICH MAY FROM TIME TO TIME BE LEGALLY PURCHASED BY SAVINGS BANKS WITHIN THE STATE AS AN INVESTMENT OF FUNDS BELONGING TO THEM OR IN THEIR CONTROL, OR IN OBLIGATIONS OF THE FEDERAL NATIONAL MORTGAGE ASSOCIATION PROVIDED SUCH OBLIGATIONS SHALL BE PAYABLE OR REDEEMABLE AT THE OPTION OF THE OWNER WITHIN SUCH TIMES AS THE PROCEEDS MAY BE NEEDED TO MEET EXPENDITURES ESTIMATED TO BE INCURRED BY THE AGENCY. S 3. This act shall take effect on the one hundred eightieth day after it shall have become a law.

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