Section 2405-D. Lease-to-own program

(1)  The agency is authorized to
  participate in lease-to-own programs as described in this  section.  The
  purpose of a lease-to-own program is to provide mortgage financing for a
  residence  occupied  as  a  primary residence by a prospective mortgagor
  pursuant to a lease-to-own contract with the  owner  of  such  property.
  The lease-to-own contract shall provide for the eventual purchase by the
  resident of the residence and an interim lease of the residence prior to
  the  closing  of  the  purchase  thereof.  The party to the lease-to-own
  contract who is the seller of the  residence  is  referred  to  in  this
  section as the "seller". The prospective purchaser who is a party to the
  lease-to-own   contract   is   referred   to  in  this  section  as  the
  "tenant-purchaser". A "residence" for the purpose of this section  is  a
  single-family  home,  a condominium housing unit or a housing unit owned
  by a cooperative housing corporation.
    (2) The agency may contract to acquire and may acquire a mortgage loan
  or loans made by a bank to a  seller  who  has  entered  a  lease-to-own
  contract with an eligible tenant-purchaser for the property which is the
  subject of and security for such mortgage loan.
    (3) (a) The lease-to-own contract shall contain:
    (i)  a  lease  of the residence, or in the case of cooperative housing
  units a sublease, for a term not to exceed five years.
    (ii) provision for a rental payment not less than the sum  of  (A)  an
  amount sufficient to pay the estimated real property taxes and insurance
  on  the residence, or in the case of a cooperative unit, the maintenance
  charges;
    (B) the cost of  routine  maintenance  of  the  residence  unless  the
  lease-to-own  contract  requires  the  tenant-purchaser  to perform such
  maintenance at his own expense;
    (C) an amount sufficient to pay the interest on the mortgage loan held
  by the agency on the residence less the estimated earnings on the escrow
  fund provided for in subdivision four of this section which is allocable
  to such mortgage held by the agency;
    (D)  an  amount  to  be  held  in   escrow,   referred   to   as   the
  "tenant-purchaser  escrow",  which,  when accumulated over the period of
  the lease-to-own contract, will amount to a sum sufficient  to  pay  the
  tenant-purchaser's required down payment under the lease-to-own contract
  plus  the estimated closing costs of purchase which will be allocable to
  the tenant-purchaser,  including  the  seller's  closing  costs  at  the
  initial closing of the mortgage to the seller; and
    (E) in the case of a condominium unit, common charges.
    (iii) provisions obligating the tenant-purchaser to buy and the seller
  to sell the residence at the end of the lease term.
    (iv)  a  provision  under which the seller waives specific performance
  with respect to the tenant-purchaser's obligation to purchase.
    (v) a  provision  that  default  by  the  tenant-purchaser  under  the
  provisions  of  the lease-to-own contract shall result in the forfeiture
  to the seller of all amounts in the tenant-purchaser escrow.
    (vi) a provision that the tenant-purchaser shall have the option  upon
  reasonable  notice  to  the  seller and the agency to elect to close the
  purchase of the residence at an earlier date than that specified in  the
  lease-to-own contract.
    (vii)   a  provision  that  the  rent  shall  be  adjusted  under  the
  lease-to-own contract periodically to take account of changes in  taxes,
  insurance, escrow earnings and other variables intended to be covered by
  the tenant's rental payment.
    (viii)  a  provision  governing the consequences of default by each of
  the parties.

    (b) The provisions of the emergency  housing  rent  control  law,  the
  local   emergency   housing   rent   control  act,  the  city  rent  and
  rehabilitation law, the emergency  tenant  protection  act  of  nineteen
  seventy-four  and  the  New York city rent stabilization law of nineteen
  hundred  sixty-nine  shall  not  apply  to  a  residence  subject  to  a
  lease-to-own mortgage, provided that the mortgage is  purchased  by  the
  agency. Such exemption shall begin at the commencement of the lease term
  and shall endure for so long thereafter as the agency holds the mortgage
  loan.  The  agency shall not sell the mortgage loan prior to the closing
  of the transfer of title to  the  tenant-purchaser  or  default  by  the
  tenant-purchaser under the lease-to-own contract.
    (c)  The  agency  shall  adopt  procedures to ensure that the payments
  contemplated by subparagraph (ii) of paragraph (a) of  this  subdivision
  are in fact applied to those purposes.
    (4)  (a)  The  mortgage loan documents with respect to a mortgage loan
  acquired by the agency pursuant to this section shall provide that there
  shall be retained as additional security for the mortgage loan an amount
  not less than fifteen percent  of  the  purchase  price  stated  in  the
  lease-to-own contract. The amount retained shall be disbursed in cash at
  the  mortgage  closing  to  an  escrow  fund  held  by  the owner of the
  mortgage. When the agency becomes the owner of the  mortgage  loan,  the
  agency  shall  receive  the  escrow  amount  to be held by the agency in
  escrow. The escrowed funds may be invested by the agency  in  securities
  in which the agency is authorized to invest its own funds. All banks and
  trust companies are authorized to give such security for deposits by the
  agency of escrowed funds as determined by the agency. The escrow amounts
  pertaining  to various lease-to-own mortgage loans may be commingled for
  investment purposes, but the agency shall keep books of account  showing
  the  amount  to  the  credit  of  each  individual  escrow  account. The
  investment earnings on each individual escrow account shall be  credited
  to the interest payment on the applicable mortgage loan.
    (b)  The  agency  shall  advise  the  seller  at  periodic  convenient
  intervals of the amount of such earnings with respect to  each  mortgage
  loan.
    (5)  With the agency's approval, the lease-to-own contract may provide
  that, so long  as  the  seller  is  not  in  default,  in  lieu  of  the
  establishment  of a tenant-purchaser escrow account, that the portion of
  the tenant-purchaser's rental payments allocable to such an account  may
  be  received  by the seller first as reimbursement of the seller's costs
  of closing of the initial mortgage to the  seller  and,  second,  to  be
  credited to the purchase price of the premises.
    (6)  (a)  At  the closing of the transfer of title to the residence to
  the tenant-purchaser pursuant to the lease-to-own contract,  the  agency
  shall  disburse  the  escrow  amount  to  or  for  the  account  of  the
  tenant-purchaser.
    (b) At such closing, the agency shall require the tenant-purchaser  to
  furnish  private mortgage insurance if such insurance is required in the
  case of other mortgage loans under this title. If such insurance is  not
  obtainable in the private market at the time of such closing, the agency
  is authorized to issue such insurance.
    (7)  The  agency  shall  establish  such  requirements  with regard to
  lease-to-own contracts, lease-to-own residences, the  qualifications  of
  tenant-purchasers,  and  the  agency's participation in any lease-to-own
  program, as may be deemed appropriate  by  the  agency  to  achieve  the
  objectives of this section. The agency's requirements, including but not
  limited  to  income  limits  applicable  to the tenant-purchaser and the
  purchase price of the residence, must be satisfied at or before the time

  the mortgage loan is purchased, and the tenant-purchaser must be  deemed
  qualified by the agency at the time.
    (8)  Notwithstanding  any  other  provision  of  law,  the  agency  is
  authorized to require, as a condition to the financing of  any  mortgage
  with  respect  to  a  lease-purchase  residence,  such restrictions upon
  assumability of the mortgage, default provisions, rights to  accelerate,
  and  other  terms  as  the  agency  may  determine  to  be  necessary or
  desirable. All such terms 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.
    (9) The provisions of this section shall expire and be of  no  further
  force and effect on and after July first, nineteen hundred ninety-five.
    * NB Expired July 1, 1995