Relates to the powers of the New York state mortgage agency

Section 2 of the bill provides for an immediate effective date.

Existing law

Under current law, SONYMA can only sell mortgages in private sales to an agency of the federal government, the federal national mortgage association or a bank from which it had originally purchased the loans.

Prior legislative history

None.

Statement in support

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, resulting in higher interest rates generally, and shutting off access to the capital markets for extended periods of time, has impacted the bond issuance process at the Agency.

As a result, over the last few months SONYMA has found itself in an unprecedented situation that has had severe consequences for the way SONYMA finances its loan programs: it has been unable to use the capital markets when necessary to issue bonds to fund its programs.

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

This fall, for the first time, SONYMA was not able to schedule a bond issuance to fund its mortgages, due to the credit crisis. Instead, 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 SONYMA to sell its loans to banks or other entities, during times when the Agency is unable to issue bonds, or when bonds are not the best financing option. The mortgages would be sold at par. A number of New York State lenders have expressed interest in purchasing SONYMA loans for their own portfolios. Typically the best execution for SONYMA is to bond for its mortgage acquisitions, but when access to capital markets is negatively impacted, it is prudent to have alternate sources of mortgage acquisitions.

Budget implications

None.

Effective date

The act takes effect immediately.