What's happening
This bill authorizes the New York State Housing Finance Agency and the State of New York Mortgage Agency to create subsidiaries to limit agency liability and expands their authority to sell mortgages.
Why it matters
Creates new legal structures (subsidiaries) to shield the main housing agencies from financial and legal risks. when acting against borrowers in default or when insuring mortgages, potentially making the agencies more willing to take action on troubled loans or expand lending/insurance activities.
Subsidiaries will be set up as public benefit corporations. with the same board members as the parent agency, but liabilities and obligations of the subsidiaries will not automatically transfer to the parent agencies—this limits risk exposure for the main agencies and, by extension, the state.
Removes prior restrictions on the sale of mortgages by the State of New York Mortgage Agency. , allowing for broader and potentially more competitive sales to a wider range of buyers, which could improve liquidity and agency flexibility in managing its mortgage portfolio.
Could lead to greater efficiency and adaptability in managing distressed properties and mortgage assets. , potentially speeding up the resolution of troubled loans and allowing for more innovative or aggressive strategies in the housing finance sector.
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Who cares
Headline styles
Limit Agency Liability with Subsidiaries
Plain English, a few words. Used as the page title.
Sponsors
Senator · Senate District 45
No co-sponsors yet.
History
- Referred to housing, construction and community development
- Referred to housing, construction and community development
Full text
3 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
6413
2017-2018 Regular Sessions
IN SENATE
May 17, 2017
Introduced by Sen. LITTLE -- (at request of the Division of Housing & Community Renewal) -- read twice and ordered printed, and when printed to be committed to the Committee on Housing, Construction and Community Development
AN ACT to amend the private housing finance law and the public authorities law, in relation to the powers of the New York State Housing Finance Agency and the State of New York Mortgage Agency
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Section 44 of the private housing finance law is amended by adding a new subdivision 33 to read as follows:
33. (a) To form one or more subsidiaries for the purpose of limiting the potential liability of the agency when exercising the powers and duties conferred upon the agency by this article in connection with the exercise of remedies by the agency against any borrower that has defaulted in its obligations under its loan agreement or mortgage with the agency and for which an event of default has been declared by the agency. Each such subsidiary created pursuant to this subdivision may exercise and perform one or more of the purposes, powers, duties, functions, rights and responsibilities of the agency (other than the issuance of indebtedness) in connection with real and personal property with respect to which the agency holds or held a mortgage, security interest or other collateral interest including: (i) bidding for, taking, holding, selling, conveying, assigning or transferring title to such property; (ii) entering into leases, subleases, operating agreements, security agreements, loan agreements or other encumbrances or arrangements with regard to such property and acting in a manner consistent with the rights, obligations or responsibilities of the owner of such property pursuant to such agreements or encumbrances; and (iii) assuming any indebtedness or other liabilities secured by such property. Notwithstanding any other provision of law to the contrary, but in all
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD10100-01-7
S. 6413 2
instances subject to the provisions of any contract with bondholders, the transfer of title to any such subsidiary or any other actions taken by the agency or such subsidiary to enforce the agency's rights under the mortgage, security interest or other collateral interest or to protect, acquire, manage or dispose of the property shall be deemed to be a corporate purpose of the agency and shall not impair the validity of any bonds, notes or other obligations of the agency to which the mortgage, security interest or other collateral interest relates.
(b) Each such subsidiary authorized by paragraph (a) of this subdivision shall be established in the form of a public benefit corporation by executing and filing with the secretary of state a certificate of incorporation which shall identify the agency as the entity organizing such subsidiary and set forth the name of such subsidiary public benefit corporation, its duration, the location of its principal office and its corporate purposes as provided in this subdivision and which certificate may be amended from time to time by the filing of amendments thereto with the secretary of state. Each such subsidiary shall be organized as a public benefit corporation, shall be a body politic and corporate, and shall have all the privileges, immunities, tax exemptions and other exemptions of the agency. The members of each such subsidiary shall be the same as the members of the agency and the provisions of section fifty-six-a of this article shall in all respects apply to such members when acting in such capacity.
(c) Nothing in this subdivision shall be construed to impose any liabilities, obligations or responsibilities of any such subsidiary upon the agency and the agency shall have no liability or responsibility therefor unless the agency expressly agrees to assume the same.
(d) Each such subsidiary created pursuant to this subdivision shall be subject to any other provision of this article pertaining to subsidiaries of public authorities.
§ 2. Section 2427 of the public authorities law is amended by adding a new subdivision 11 to read as follows:
11. (a) To form one or more subsidiaries for the purpose of limiting the potential liability of the agency only with respect to insuring mortgage loans and providing development corporation credit support. Each such subsidiary created pursuant to this subdivision may exercise and perform one or more of the purposes, powers, duties, functions, rights and responsibilities of the agency with respect to insuring mortgage loans and providing development corporation credit support in connection with real and personal property with respect to which the agency holds or held a mortgage, security interest or other collateral interest including: (i) bidding for, taking, holding, selling, conveying, assigning or transferring title to such property; (ii) entering into leases, subleases, operating agreements, security agreements, loan agreements or other encumbrances or arrangements with regard to such property and acting in a manner consistent with the rights, obligations or responsibilities of the owner of such property pursuant to such agreements or encumbrances; and (iii) assuming any indebtedness or other liabilities secured by such property. Notwithstanding any other provision of law to the contrary, but in all instances subject to the provisions of any contract of insurance, the transfer of title to any such subsidiary or any other actions taken by the agency or such subsidiary to enforce the agency's rights under the mortgage, security interest or other collateral interest or to protect, acquire, manage or dispose of the property shall be deemed to be a corporate purpose of the agency.
S. 6413 3
(b) Each such subsidiary authorized by paragraph (a) of this subdivision shall be established in the form of a public benefit corporation by executing and filing with the secretary of state a certificate of incorporation which shall identify the agency as the entity organizing such subsidiary and set forth the name of such subsidiary public benefit corporation, its duration, the location of its principal office and its corporate purposes as provided in this subdivision and which certificate may be amended from time to time by the filing of amendments thereto with the secretary of state. Each such subsidiary shall be organized as a public benefit corporation, shall be a body politic and corporate, and shall have all the privileges, immunities, tax exemptions and other exemptions of the agency. The members of each such subsidiary shall be the same as the members of the agency and the provisions of section fifty-six-a of the private housing finance law shall in all respects apply to such members when acting in such capacity.
(c) Nothing in this subdivision shall be construed to impose any liabilities, obligations or responsibilities of any such subsidiary upon the agency and the agency shall have no liability or responsibility therefor unless the agency expressly agrees to assume the same.
(d) Each such subsidiary created pursuant to this subdivision shall be subject to any other provision of this article pertaining to subsidiaries of public authorities.
§ 3. Subdivision 9 of section 2404 of the public authorities law, as amended by chapter 1023 of the laws of 1971, is amended to read as follows:
(9) Subject to any agreement with bondholders or noteholders, to sell any mortgages or other personal property acquired by the agency at public or private sale and at such price or prices as it shall determine[, provided, however, that a private sale shall be limited to an agency of the federal government, the federal national mortgage association, or a sale of a mortgage to a bank from which it was originally purchased]. If the agency determines to sell mortgages at public sale, a notice of such sale shall be published at least once at least five days prior to the date of such sale in a financial newspaper or journal published in the city of New York;
§ 4. This act shall take effect immediately.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the private housing finance law and the public authorities law, in relation to the powers of the New York State Housing Finance Agency and the State of New York Mortgage Agency
Purpose of the bill
This bill would grant: (i) the New York State Housing Finance Agency ("HFA") and the State of New York Mortgage Agency Mortgage Insurance Fund (the "SONYMA MIF") authority to form one or more subsidiaries for the purpose of taking title to property in connection with a foreclosure or other exercise of remedies under a mortgage or other security instrument held by HFA or the SONYMA MIF, in order to limit the potential liability of HFA or the SONYMA MIF in connection with taking ownership of a foreclosed property, and (ii) the State of New York Mortgage Agency ("SONYMA") authority to sell its mortgages at private sales.
Summary of provisions
HFA
Read the full memo (937 words)
Section 1 of the bill would add a new Private Housing Finance L. § 44(33) enabling HFA to create one or more subsidiaries to take title to property in connection with a foreclosure or other exercise of remedies under a mortgage or other security instrument held by HFA or the SONYMA MIF, in order to limit the potential liability of HFA or the SONYMA MIF in connection with taking such ownership.
SONYMA MIF
Section 2 of the bill would add Public Authorities L. § 2427(11) to enable the SONYMA MIF to create one or more subsidiaries for the same purpose as described in Section 1.
SONYMA
Section 3 of the bill would amend Public Authorities L. § 2404(9) to remove the limitation on the SONYMA's authority to sell mortgages at private sales.
Section 4 of the bill would provide for an immediate effective date.
Justification
HFA
Under current law, HFA has the power to foreclose, take possession of, and otherwise take enforcement actions with respect to any property on which it has made or financed a mortgage loan. However, current law does not provide HFA the power to form a subsidiary for the purpose of taking title to and possession of any foreclosed property.
In order to protect FIFA from potential liability in connection with foreclosing on and taking ownership of a property on which HFA has made or financed a mortgage loan following a default under such mortgage, it would be prudent and desirable for a subsidiary of HFA to take title to such property rather than HFA directly. Having a subsidiary take ownership of a foreclosed property would help protect FIFA against potential liabilities in connection with such property, including environmental liabilities and third party tort claims. The ability to create a subsidiary to own foreclosed properties is of increased importance following HFA's acquisition of the State's
Mitchell Lama portfolio, which contains a number of nonperforming or under-performing loans.
SONYMA MIF
Under current law, SONYMA MIF has the power to foreclose, take possession of, and otherwise take enforcement actions with respect to, any property which it insures. However, current law does not provide SONYMA MIF the power to form a subsidiary for the purpose of taking title to and possession of any foreclosed property.
In order to protect SONYMA MIF from potential liability in connection with foreclosing on and taking ownership of a property on which it has an insurance following a default under such mortgage, it would be prudent and desirable for a subsidiary of SONYMA MIF to take title to such property rather than the SONYMA MIF directly. Having a subsidiary take ownership of a foreclosed property would help protect the SONYMA MIF against potential liabilities in connection with such property, including environmental liabilities and third party tort claims. The ability to create a subsidiary to own foreclosed properties is of increased importance given the importance of the SONYMA MIF in recent years as a source of insurance support and as a funding source for many of the State's affordable housing programs.
SONYMA
Under current law, SONYMA can only sell mortgages in private sales to an agency of the federal government, the federal national mortgage association, or to a bank from which it has originally purchased the loans. This bill would allow SONYMA to avail itself of opportunities to sell its loans to banks or other entities, especially when SONYMA 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.
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 had never been precluded from issuing bonds on a regular basis and when needed to fund bond purchases.
The lack of capital market access that comes with fiscal crises, 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, as provided for in this bill.
Prior legislative history
none.
Fiscal implications
none.
Effective date
immediate.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.