Extends various chapters relating to the powers of the New York state housing finance agency and the New York state mortgage agency

Summary of provisions

Section 1 of the bill would increase HFA's bonding authority by $1 billion to a maximum aggregate of $16.28 billion.

Sections 2 and 3 of the bill would extend HFA's authority to finance certain multifamily housing projects until July 23, 2013.

Section 4 of the bill would extend SONYMA's authority to purchase forward commitment mortgages until July 23, 2013.

Section 5 of the bill would extend SONYMA's authority to issue new money taxable and tax-exempt bonds until July 23, 2013, and increases SONYMA's tax-exempt bonding authority by $1 billion to a maximum of $10.22 billion.

Section 6 of the bill would extend until July 23, 2013, the sunset date of (i) sections six and nine through seventeen of Chapter 555 of the Laws of 1989 that broadened the scope of MIF to provide primary mortgage insurance on a statewide basis to individual homeowners and to provide pool insurance to all of SONYMA's loans, and (ii) section 13 of Chapter 3 of the laws of 2004 concerning development corporation credit support relating to the Jacob Javits Convention Center.

Section 7 would extend until July 23, 2013, the sunset date of the requirement that at least 20% of a rehabilitation loan given by SONYMA be used for rehabilitation or construction of improvements.

Section 8 of the bill would provide for an immediate effective date.

Existing law

HFA

Current law authorizes HFA to issue bonds and notes for its housing programs for any of its corporate purposes in an aggregate principal amount not to exceed $15.28 billion. HFA's authority to finance certain multi-family housing projects is scheduled to sunset on June 30, 2011.

SONYMA

Under existing law, SONYMA's authority to purchase forward commitment mortgages and to issue new money taxable bonds are scheduled to sunset on July 16, 2011. SONYMA is currently authorized to issue up to $9.22 billion of new money tax-exempt bonds and up to $800 million of new money taxable bonds by July 16, 2011.

MIF

Chapter 555 of the Laws of 1989, as amended, authorizes MIF to provide primary mortgage insurance on a statewide basis to individual homeowners and to provide pool insurance to all of SONYMA's loans and is scheduled to sunset on July 16, 2011. Chapter 3 of the Laws of 2004, as amended, enabling SONYMA to provide credit support for the Jacob Javits Convention Center, is scheduled to sunset on July 16, 2011.

SONYMA is currently authorized through July 23, 2012 to insure rehabilitation loans, which are defined in Public Authorities Law §2426 (12) as loans wherein at least 20% of the mortgage loan amount is attributable to the cost of rehabilitation or construction of improvements.

Legislative history

Numerous similar extensions and increases in HFA and SONYMA bonding authority have been made. The HFA provisions were extended in Chapter 407 of the Laws of 2010; Chapter 176 of the Laws of 2009; Chapter 151 of the laws of 2008; Chapter 85 of the Laws of 2007; Chapter 398 of the Laws of 2006; Chapter 124 of the Laws of 2005; Chapter 204 of the Laws of 2004; Chapter 99 of the Laws of 2003; Chapter 48 of the Laws of 2002; Chapter 363 of the Laws of 2001; and Chapter 131 of the Laws of 2000.

The SONYMA provisions were extended in Chapter 218 of the Laws of 2010; Chapter 177 of the Laws of 2009; Chapter 148 of the Laws of 2008; Chapter 227 of the Laws of 2007; Chapter 138 of the Laws of 2006; Chapter 121 of the Laws of 2005; Chapter 147 of the Laws of 2004; Chapter 141 of the Laws of 2003; Chapter 103 of the Laws of

2002; Chapter 111 of the Laws of 2001; and Chapter 132 of the Laws of 2000.

The MIF provisions contained in section 6 of this bill were extended in Chapter 192 of the Laws of 2009; Chapter 230 of the Laws of 2007; Chapter 125 of the Laws of 2005; Chapter 145 of the Laws of 2003; and Chapter 110 of the Laws of 2001. The MIF provisions contained in section 7 of this bill were extended in Chapter 162 of the Laws of 2010; Chapter 150 of the Laws of 2008; Chapter 137 of the Laws of 2006; Chapter 309 of the Laws of 2005; and Chapter 172 of the Laws of 2002.

Statement in support

HFA

This bill would increase the maximum amount of new money bonds which HFA is authorized to issue, and would extend HFA's authority to finance certain multifamily housing projects until July 23, 2013. The Agency currently has a substantial pipeline of financing requests that will result in both the creation and preservation of affordable housing across New York State. The bill would increase HFA's authority to issue bonds up to $1 billion for a maximum aggregate of $16.28 billion, which will enable the Agency to continue to meet the housing demands of New Yorkers, as well as create jobs and provide economic stimulus.

SONYMA

SONYMA's statutory authorizations to issue new money tax-exempt bonds and to purchase forward commitment mortgages are scheduled to sunset on July 16, 2011. SONYMA's statutory authorization to issue new money taxable bonds is also scheduled to sunset on July 16, 2011. This bill would extend the sunset dates for the issuance of new money tax-exempt bonds and new money taxable bonds, and for the purchase of forward commitment mortgages, until July 23, 2013.

This bill would also increase the maximum amount of new money tax-exempt bonds which SONYMA is authorized to issue. The increase being requested is intended to address the borrowing needs of the Agency in 2011, 2012 and the first half of 2013, which borrowing needs also include issuing bonds for student loan purposes.

The Agency, like most state housing finance agencies throughout the country, has been adversely impacted in its ability to continue to offer low interest rate fixed rate mortgage financing to eligible first-time homebuyers, due to the dramatic events in the financial markets during late 2008, the impact of which is still being felt in the capital markets. In order to ameliorate this situation, the US Department of Treasury announced in 2009 a program that will permit state housing agencies such as SONYMA to sell tax-exempt bonds to Fannie Mae and Freddie Mac (the "GSEs"). The GSEs securitize the bonds and simultaneously sell the securities to the Department of Treasury. The program has enabled the Agency to lower its borrowing costs and as a result, the Agency has once again been able to offer its mortgages at attractive interest rates. The program runs through the end of 2011, by which time the capital markets should have fully recovered.

In early 2009, the Agency's statute was amended to modernize the Agency's authority to issue bonds to finance student loans. The Agency completed its first bond sale in December 2009. Demand for the program has been slow to develop, but the Agency will need to use bonding authority to issue bonds in the future.

Given the Treasury Department program and the implementation of the student loan program, the Agency expects a continuing demand for its products. SONYMA's current authorities to issue new money tax-exempt bonds and taxable bonds are insufficient to cover the current expected demand for mortgages and student loans in the next few years. The bill would increase SONYMA's authority to issue additional tax-exempt bonds and notes up to a total maximum amount of $10.22 billion which will enable SONYMA to satisfy its expected mortgage and student loan demand.

MIF

Enactment of Chapter 575 of the Laws of 1989 and of Chapter 3 of the Laws of 2004 enabled SONYMA to provide primary mortgage insurance on a statewide basis, provide pool insurance for mortgages on one-to-four family homes and on multi-family projects where the loans are made by lenders who meet certain criteria and provide credit support to the Jacob Javits Convention Center. However, these provisions will sunset on July 16, 2011. The bill would extend these sunset provisions until July 23, 2013.

Without an extension, the MIF will only be able to insure mortgages for projects located in "blighted" neighborhoods and provide per project mortgage insurance in amounts not exceeding $5 million or $10 million depending upon project type. In addition, the MIF will be unable to provide primary mortgage insurance, pool insurance and credit support.

SONYMA's primary tool for promoting new construction and rehabilitation of affordable housing is its authority to insure Rehabilitation Loans. The statutory authority that reduced the percentage of a rehabilitation loan that must be attributable by SONYMA to the cost of rehabilitation or new improvements from 25% to 20% of the mortgage loan is set to expire on July 23, 2012.

The 25% requirement is inconsistent with the provisions of the Internal Revenue Code ("Code") concerning the issuance of tax-exempt bonds for multifamily housing. Under the Code a minimum of 15% of such bonds must fund construction or rehabilitation costs. Several of the most important users of SONYMA's mortgage insurance are public benefit corporations, such as the New York State Housing Finance Agency, that issue tax-exempt bonds subject to the standards set by the Code.

The 25% requirement also encourages lenders and borrowers to pad prospective loans with additional improvement not otherwise necessary for the project so that they are eligible under the current definition of Rehabilitation Loan.

The reduction of the percentage requirement from 25% to 20% has resulted in SONYMA's insurance product matching more closely the needs of some of its primary users without in any way negatively affecting

the programmatic or financial integrity of the Mortgage Insurance Fund.

Budget implications

This bill does not affect the state budget.

Effective date

This bill would become effective immediately.