Section 2405. Purchase of existing mortgages

(1) A purpose of the agency
  shall be to purchase existing mortgages  from  banks  within  the  state
  during  periods  when  there is an inadequate supply of credit available
  for new residential mortgages and to require such  banks  to  invest  an
  amount  equal  to  the  proceeds  thereof  as rapidly as possible in new
  mortgages on residential real  property  for  family  units  within  the
  state.
    It  is  hereby  found  and declared that such activities by the agency
  will alleviate a condition of affairs in this state which is contrary to
  the public health, safety and general welfare and which has  constituted
  in  the  past  and  from  time  to time in the future can be expected to
  constitute a public emergency. It is further  found  and  declared  that
  such  purposes  are in all respects for the benefit of the people of the
  state of New York and the agency shall  be  regarded  as  performing  an
  essential  governmental  function  in  carrying  out its purposes and in
  exercising the powers granted by this title.
    (2) The agency shall purchase existing mortgages from  banks  at  such
  prices  and  upon  such  terms  and  conditions  as  it shall determine;
  provided, however, that  the  total  purchase  price  for  all  existing
  mortgages  which  the  agency commits to purchase from a bank at any one
  time shall in no event be more than the total of  the  unpaid  principal
  balances thereof, plus accrued interest thereon.
    (3)  (a)  The  agency  shall  require  as  a  condition of purchase of
  existing mortgages from banks that such banks shall, within such  period
  as may be approved by the agency not in excess of ninety days of receipt
  of the purchase price, enter into written commitments to loan and shall,
  within  such  period  as  may  be approved by the agency, loan an amount
  equal to the entire purchase price of such  existing  mortgages  on  new
  mortgages  within  the  state  having  such  terms  as  the  agency  may
  prescribe.
    (b) (i) The proportionate  dollar  amount  of  commitments  from  each
  agency  issue of bonds or notes used to purchase mortgages from banks in
  each region of the state, as such regions are set forth  in  subdivision
  nine  of  section  twenty-four  hundred  twenty-six of this title shall,
  subject to subparagraph (ii) hereof, reflect  the  proportion  that  the
  number of families in each region bears to the number of families in the
  state as a whole.
    (ii)  To  the extent that the reasonable demand by banks in any region
  is insufficient to accommodate the proportion  of  an  agency  issue  of
  bonds  or  notes determined pursuant to subparagraph (i) hereof for such
  region, the agency shall use reasonable efforts  to  purchase  mortgages
  such  that  the  excess funds from such region are distributed among the
  other regions in  proportion  to  the  relative  reasonable  demand.  In
  determining  reasonable  demand,  the agency shall consider, among other
  things, historical demand for mortgages  in  such  regions,  the  dollar
  amount  of  offers  by  banks  to  sell  mortgages to the agency and the
  reasonableness of such offers, considering the size,  mortgage  history,
  total  assets, liquidity and financial ability of the bank to conform to
  the contract of sale and the bank's record  of  compliance  with  agency
  requirements.
    (iii)  The  agency shall use its best efforts to the end that not less
  than one-sixth in dollar amount of  new  mortgages  resulting  from  its
  program   of   purchasing   mortgages  shall  be  on  newly  constructed
  residences. A newly constructed residence is defined as a  one  to  four
  family dwelling not previously occupied.
    (iv)  During  the  time  that  the  agency is accepting offers to sell
  mortgages from banks, the  agency  shall  advertise,  in  newspapers  of
  general  circulation  within  the  state,  the fact that it is accepting

  offers from banks, and such other information as the  agency  determines
  to be helpful in generating maximum participation by banks and potential
  mortgagors.  All  banks  within each such region shall be invited by the
  agency  to  participate  in  the agency's purchase of mortgages from the
  proceeds of the sale of each issue by the agency of its bonds and notes.
  The allocation of the proceeds of each such agency issue among the banks
  requesting  participation  within  each  region  shall,  to  the  extent
  practicable,  maximize  the  number  of  banks  which  participate.  Any
  commitment between the agency and a bank shall  require  that  the  bank
  provide  the agency with such information, as may be deemed necessary by
  the agency, for the agency to assure that the requirements of this title
  or any other requirements imposed by the  agency  with  respect  to  the
  purchase  of mortgages with the proceeds of any agency issue of bonds or
  notes has been fulfilled.
    (c) No commitment to loan or loan on  a  mortgage  secured  or  to  be
  secured  by  a  multiple  dwelling  shall  satisfy  the  requirement  of
  paragraph (a) of this subdivision unless the prior written  approval  of
  such commitment shall have been obtained from the agency. The agency may
  refuse  to  approve  any  commitment to lend on such a multiple dwelling
  mortgage if so required by the terms of any bonding resolution and shall
  not approve any commitment to lend on such a multiple dwelling  mortgage
  if  the  approval thereof would increase the total dollar amount of such
  commitments on multiple dwelling mortgages approved by the agency to  an
  amount  in  excess  of  forty percent of the total purchase price of all
  mortgages theretofor purchased by the agency pursuant to this section.
    (4) In the case of individual borrowers, new mortgages made  by  banks
  that  sell existing mortgages to the agency shall bear interest computed
  in accordance with section 5-501 of the general obligations law (whether
  or not insured or guaranteed by the United  States  of  America  or  any
  agency  thereof)  at  a  rate which does not exceed the maximum interest
  rate, if any, set by the agency for such mortgages. The agency  may  set
  such  a maximum interest rate chargeable to individual borrowers on such
  new mortgages, notwithstanding the maximum interest rate, if any,  fixed
  by  section  5-501  of  the general obligations law or any other law not
  specifically amending or applicable to this section, at  the  rate  that
  the  existing mortgages purchased by the agency were discounted to yield
  plus an interest differential, not in excess of one percent  per  annum,
  which  the  agency  from  time  to  time  shall determine to be adequate
  consideration to induce such banks to sell  existing  mortgages  to  the
  agency  and  to loan an amount equal to the proceeds on new mortgages in
  furtherance of the purposes of and subject to  the  conditions  of  this
  title. In the case of corporate borrowers, such new mortgages shall bear
  interest  at  a  rate  not substantially lower than the rate of interest
  that banks are charging at the time  of  commitment  on  comparable  new
  mortgages.  Each  such  bank that sells existing mortgages to the agency
  shall annually account and pay over to the agency or  to  the  New  York
  state  housing finance agency for deposit in and for the purposes of the
  low rent lease account as  set  forth  in  paragraphs  (a)  and  (b)  of
  subdivision  four of section forty-four-a of the private housing finance
  law or any successor entity as the agency may direct,  or  to  both  the
  agency  and  the  New York state housing finance agency for such deposit
  and purposes in such proportions as the agency  may  direct,  an  amount
  equal  to the difference between (a) the total amount of interest (which
  shall include all charges to individual  and  corporate  borrowers  that
  would  be  treated  as  interest  under  section  5-501  of  the general
  obligations law and any regulations of the  banking  board  pursuant  to
  section  fourteen-a  of  the  banking  law)  received  by  it during the
  preceding year on all such new mortgages and (b)  the  total  amount  of

  interest  which  such  new  mortgages would have yielded if the interest
  thereon had been at the maximum rate chargeable to individual  borrowers
  on  such  new mortgages plus an additional interest differential, not in
  excess of one percent per annum, determined by the agency to be adequate
  consideration  to  induce  participating  banks  to  make  new  loans on
  multiple dwellings.
    (5) The agency shall require the submission to it by  each  bank  from
  which  the agency has purchased existing mortgages evidence satisfactory
  to the agency of the making of new mortgage loans and of paying over  to
  the low rent lease account as required by this section and in connection
  therewith  may,  through its employees or agents or those of the banking
  department, inspect the books and records of any such bank.
    (6) Compliance by any bank with the terms of  its  agreement  with  or
  undertaking  to  the  agency  with  respect  to  the  making  of any new
  mortgages in connection with the  sale  of  existing  mortgages  and  of
  paying  over  to the low rent lease account may be enforced by decree of
  the supreme court. The agency may require as a condition of purchase  of
  existing  mortgages from any national banking association the consent of
  such association to the jurisdiction of the supreme court over any  such
  proceeding.  The  agency  may  also  require agreement by any bank, as a
  condition of the agency's purchase of existing mortgages from such bank,
  to the payment of penalties to the agency for violation by the  bank  of
  its  undertakings to the agency, and such penalties shall be recoverable
  at the suit of the agency.
    (7) The agency shall  require  as  a  condition  of  purchase  of  any
  existing mortgage from a bank that the bank represent and warrant to the
  agency that
    (a) the unpaid principal balance of the mortgage and the interest rate
  thereon have been accurately stated to the agency;
    (b)  the  amount  of  the  unpaid  principal balance is justly due and
  owing;
    (c) the bank has no notice  of  the  existence  of  any  counterclaim,
  offset  or  defense  asserted  by  the  mortgagor  or  any  successor in
  interest;
    (d) the mortgage is evidenced by a  bond  or  promissory  note  and  a
  mortgage  document which has been properly recorded with the appropriate
  public official;
    (e) the mortgage constitutes a valid first lien on the  real  property
  described to the agency subject only to real property taxes not yet due,
  installments  of assessments not yet due, and easements and restrictions
  of record which do not adversely affect, to a material degree,  the  use
  or value of the real property or improvements thereon;
    (f) the mortgage when made was lawful under the banking law or federal
  law,  whichever  governs the affairs of the bank, and would be lawful on
  the date of purchase by the agency if made by the bank on that  date  in
  the amount of the then unpaid principal balance;
    (g)  the  mortgagor  is  not  now  in  default  in  the payment of any
  installment of principal or interest, escrow funds, real property  taxes
  or  otherwise  in  the performance of his obligations under the mortgage
  documents and has not to the knowledge of the bank been  in  default  in
  the performance of any such obligation for a period of longer than sixty
  days during the life of the mortgage; and
    (h)  the  improvements to the mortgaged real property are covered by a
  valid and subsisting policy of insurance issued by a company  authorized
  by  the  superintendent of insurance to issue such policies in the state
  of New York and providing fire and extended coverage to  an  amount  not
  less  than  eighty percent of the insurable value of the improvements to
  the mortgaged real property.

    (8) Each bank shall be liable to the agency for any  damages  suffered
  by  the  agency  by  reason  of the untruth of any representation or the
  breach of any warranty and, in the event that any  representation  shall
  prove  to be untrue when made or in the event of any breach of warranty,
  the  bank  shall,  at  the option of the agency, repurchase the existing
  mortgage  for  the  original  purchase  price   adjusted   for   amounts
  subsequently paid thereon, as the agency may determine.
    (9)  The agency need not require the recording of an assignment of any
  existing mortgage purchased by it from a bank pursuant to  this  section
  and shall not be required to notify the mortgagor of its purchase of the
  mortgage. The agency shall not be required to inspect or take possession
  of  the  mortgage documents if the bank from which the existing mortgage
  is purchased by the agency  shall  enter  a  contract  to  service  such
  mortgage and account to the agency therefor.
    (10)  Notwithstanding  any  other  provision  of  law,  the  agency is
  authorized to require, as a condition to  the  purchase  from  banks  of
  existing  mortgages,  such  restrictions  upon  assumability of each new
  mortgage as the agency may determine to be  necessary  or  desirable  to
  assure  the  exemption from federal income taxes of the interest payable
  on its bonds and notes. Such restrictions shall be  enforceable  by  the
  originating  bank,  the agency, and any successor holder of the mortgage
  unless expressly waived in writing by or on behalf of the agency.
    (11) The agency shall maintain a continuous review of the availability
  of funds in regular banking channels for  mortgages.  Except  as  stated
  herein  with  respect to forward commitment mortgages and housing loans,
  in the event that the agency shall determine that an adequate supply  of
  funds  exists in regular banking channels for mortgages the agency shall
  not authorize the issuance of bonds for the purchase of mortgages except
  refunding bonds, until such time as the agency shall determine that  the
  supply  of funds available for mortgages is again inadequate. The agency
  shall notify the governor, the temporary president of  the  senate,  and
  the  speaker  of  the  assembly  of  any  determination that there is an
  inadequate supply of funds available for mortgages made by it under this
  subdivision. Discontinuance by the agency of the purchase  of  mortgages
  pursuant  to  a determination that an adequate supply of funds exists in
  regular banking channels shall not constitute, or  in  any  way  effect,
  termination  of the agency as provided in subdivision six of section two
  thousand  four  hundred  three  of  this  title.   Notwithstanding   the
  foregoing,  the  agency  may  issue  bonds  or  notes for the purpose of
  furthering forward commitment mortgage  programs  described  in  section
  twenty-four  hundred  five-b  of  this  title  and housing loan programs
  described in section twenty-four hundred five-c of  this  title  if  the
  agency  shall  determine  that such programs will increase the supply of
  credit available for  new  residential  mortgages  and  new  residential
  improvement  loans  at  carrying  charges  within the financial means of
  persons and families of low or moderate income.
    * NB Effective until July 16, 2010