Relates to the NYS interim short-term financing account

Section 2 would amend public Authorities Law ("PAL") § 2426 to define "interim short-term financing support."

Sections 3 and 4 would provide additional powers to SONYMA for interim short-term financing.

Sections 5 through 8 would authorize SONYMA to create an interim short term financing account within the mortgage insurance fund to be used for interim short-term financing support. These sections would also provide that: (1) the mortgage insurance fund shall be used as a revolving fund with respect to interim short-term financing support; (2) that SONYMA may credit from the special account to the interim short-term financing account such moneys as are required to satisfy the mortgage insurance reserve requirement thereof; (3) that mortgage loans purchased with moneys in the interim short-term financing account shall be kept in the interim short-term financing account and shall not be commingled with any other accounts except as otherwise authorized; and (4) that the interim short-term financing account shall be excluded from the excess balance calculation set forth in PAL § 2429-b(2).

Section 9 would provide that certain amendments to law enacted in 1989, in 2004 and as part of this bill shall continue to apply to certain commitments for mortgage insurance, development corporation credit support and interim short-term financing support in force on or before July 16, 2012.

Section 10 would provide that this bill and powers delineated therein be liberally construed to effectuate the intent and purpose of the bill.

Section 11 would contain a severability clause.

Section 12 would provide that the bill takes effect immediately.

Existing law

Under current law, SONYMA's MIF does not have authority to provide interim short-term financing support for SONYMA's mortgage loan acquisitions.

Legislative history

None. STATEMENT IN SUPPORT :

SONYMA's mortgage programs are continuously available to mortgagors throughout New York State. Qualifying mortgage loans made to low and moderate income homebuyers are delivered to SONYMA by its participating banks on a weekly basis for purchase by SONYMA, at stated rates of interest. SONYMA funds the loan purchases primarily through the issuance of tax-exempt bonds in the capital markets. Throughout its history, SONYMA has never been precluded from issuing bonds on a regular basis and, when needed, to fund bond purchases.

The current global credit and liquidity crisis has had a severe impact on the way SONYMA funds its programs. The disruption in the short-term debt markets resulted in higher. interest rates, shutting off access to the capital markets for extended periods of time, and this has impacted the bond issuance process at SONYMA.

For the first time, this fall SONYMA was not able to schedule a bond issuance, due to the credit crisis. Along with other housing bond issuers throughout the country, SONYMA could not issue bonds to fund its mortgages. SONYMA has had to use excess available funds, which would normally be used to subsidize programs to acquire its mortgage loans. Only recently, as the crisis has eased, has SONYMA been able to come to market with a bond issue that was not as large as SONYMA would have expected.

Additionally, SONYMA, like other housing bond issuers, depends on issuing a certain amount of variable rate bonds as part of its bond issues. This device allows it to lower overall costs. An effect of the credit crisis has been to make variable rate bonds both more expensive and less available to issuers, primarily due to the dearth of liquidity facility providers. These entities provide back-up for SONYMA in cases where variable rate bonds are tendered by bondholders.

The lack of capital market access, plus the increased costs and lessened liquidity for variable rate bonds make it imperative for SONYMA to avail itself of alternative ways of acquiring funds to pay for its mortgage loan commitments.

This proposal would allow the MIF to make "warehousing" funds available to SONYMA, so SONYMA can acquire those mortgage loans in anticipation of coming to market with a bond issue. The loan would be deposited in the newly-created interim short-term financing account. Once SONYMA is able to access the capital markets, SONYMA would buy the loans out of the interim short-term financing account and the funds therein would be replenished. This kind of warehousing program will provide a stable funding alternative to SONYMA so that it can maintain its continuously available mortgage programs in times when access to the capital markets is shut off, or made prohibitively expensive.

The interim short-term financing account can only be used so long as the then existing rating on the MIF is not adversely affected as a result of the use of the excess reserves to fund the temporary loan acquisitions.

Budget implications

None.

Effective date

The bill takes effect immediately.