Authorizes the establishment of the home equity protection insurance program

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.