Section 23. Municipal loans and municipally aided projects

1.  A
  municipality may make or contract to make loans to a  company  or  to  a
  public   benefit   corporation  providing  housing  for  staff  members,
  employees or students of a college, university, hospital or  child  care
  institutions  and  their  immediate families in an amount not to exceed,
  except in the case of a non-profit company incorporated pursuant to  the
  provisions  of  the  not-for-profit corporation law and this article for
  the purpose of providing housing for aged or handicapped persons of  low
  income,  and  except  in  the  case  of  a  company  or  public  benefit
  corporations providing housing for staff members, employees or  students
  of  a  college, university, hospital or child care institution and their
  immediate families, and  except  in  the  case  of  a  municipally-aided
  non-profit  company or of a municipally-aided mutual company, and except
  in the case of a low income non-profit housing company, ninety-five  per
  centum  of the project cost to be secured, except as provided in section
  fifteen of this article, by a first mortgage lien and may make temporary
  loans or advances to a company in anticipation of a permanent  municipal
  loan.  In  the case of a non-profit company incorporated pursuant to the
  provisions of the not-for-profit corporation law and  this  article  for
  the  purpose of providing housing for aged or handicapped persons of low
  income and in the case of  a  company  or  public  benefit  corporations
  providing housing for staff members, employees or students of a college,
  university,  hospital  or  child  care  institution  and their immediate
  families, and in the case of a municipally-aided non-profit  company  or
  of  a  municipally-aided mutual company, and in the case of a low income
  non-profit housing company, such loans may not exceed the total  project
  cost.  Notwithstanding  the foregoing, such loans to a municipally-aided
  mutual company to assist in financing the acquisition of a  building  by
  residents  thereof  may not exceed ninety-five per centum of the project
  cost. Such mortgage, or bonds or notes secured thereby and such contract
  may  contain  such  terms  and  conditions  not  inconsistent  with  the
  provisions  of  this  article  as  the  local  legislative body may deem
  necessary or desirable to secure repayment of  its  loan,  the  interest
  thereon and other charges in connection therewith. In the case of a loan
  in  an  amount  greater than ninety-five per centum of the total project
  cost the supervising agency may in its discretion  require  satisfactory
  independent  guarantees  that  the  loan will be repaid according to the
  terms of the company's bond or note and mortgage.
    1-a. Notwithstanding any other provision of this article or any  other
  law, any such loan may be made to a company at such rate of interest, if
  any,  as  the  local legislative body may deem necessary or desirable to
  carry out the policy and purposes of this article.
    2. The supervising agency shall have  exclusive  power  to  promulgate
  such   supplementary   rules   and   regulations   with   respect  to  a
  municipally-aided project and a company formed to undertake  or  operate
  any  such  project,  as  may be necessary to carry out the provisions of
  this article. No assignment for collateral or pledge by  a  municipality
  of  its mortgage interest in a municipally-aided project to the state or
  to any political subdivision thereof shall either affect  the  power  of
  the  supervising  agency granted herein or authorize the commissioner to
  exercise any powers not otherwise granted in this article.
    3. Prior to the date of approval by the local legislative body of  the
  contract  between  a  municipality and a company for a municipally aided
  project, the total estimated project cost of such project, the estimated
  capital requirements of the company formed to undertake or operate  such
  project,   the   initial   capital  structure  of  such  company  and  a
  modification of any of the foregoing items,  shall  be  subject  to  the
  approval   of   the   supervising   agency  and  the  commissioner.  Any

  modification of any of the foregoing  items  made  after  such  date  of
  approval  of the contract shall be subject solely to the approval of the
  supervising agency. If after such date of approval of the contract,  any
  change is made in such contract which requires the approval of the local
  legislative  body,  such  change  shall  also  be  subject  to the prior
  approval of the commissioner.
    4. The commissioner shall  have  the  power,  prior  to  the  date  of
  approval  by  the local legislative body of a contract between a company
  and the municipality for a municipally aided  project,  to  approve  the
  proposed  maximum average of the rentals to be charged for the dwellings
  in the project,  or  any  modifications  thereof.  After  such  date  of
  approval  of  the contract, the supervising agency shall have sole power
  to increase or reduce the rental rate for the dwellings in  the  project
  in  the  manner prescribed by section thirty-one of this article for the
  variance of the rental rates. However, if a variance in such rental rate
  is made necessary because of a change in the project which requires  the
  approval  of  the  local  legislative  body,  the  prior approval by the
  commissioner of such variance of the rental rate shall also be obtained.
    5. The commissioner and the supervising agency shall  each  have  full
  power to investigate into and order a company undertaking or operating a
  municipally  aided  project  to  furnish such reports and information as
  each may require concerning  the  planning,  construction,  acquisition,
  rehabilitation, management or operation of the project.
    6.  The  commissioner  shall  have  the  power to audit the books of a
  company undertaking or operating a municipally aided project  solely  as
  to  the  legality  of  the  expenditures and to disallow any expenditure
  which the commissioner shall find has been made in violation of  law  or
  any  rule  or  regulation  duly  issued  pursuant  to  this article. The
  supervising agency shall have the full power to audit the books  of  any
  such  company  as  to  the  legality, reasonableness or necessity of its
  expenditures. Any expenditure disallowed  by  the  commissioner  or  the
  supervising  agency  on  such  audits  shall  not  be  included  in  any
  construction, management or  operating  costs  in  connection  with  any
  application  to  increase  or  reduce the rents or carrying charges in a
  project.
    7. (a) At the direction of the supervising agency,  with  the  consent
  and  approval  of  the mayor the municipality shall establish and keep a
  separate fund known as the limited-profit mortgage reserve fund for  the
  purposes  of  insuring  the municipality against any loss resulting from
  the  making  of  a  mortgage  loan,  temporary  loan  or  advance  to  a
  municipality-aided  project and to protect the municipality in the event
  of delinquency in the repayment of such mortgage loan, temporary loan or
  advance.
    (b) There shall be paid into such fund the portions of fees  allocated
  to  and  directed to be deposited in such fund by the supervising agency
  with  the  consent  and  approval  of  the  mayor  as  provided  for  in
  subdivision  seven of this section. In addition, there shall be credited
  to and deposited in such fund any  portion  of  the  unexpended  balance
  remaining in the housing fund as the supervising agency with the consent
  and  approval  of the mayor may determine to be in excess of the amounts
  needed to meet expenditures required to be paid from the housing fund.
    (c) The monies in the limited-profit mortgage reserve  fund  shall  be
  deposited  in one or more of the banks or trust companies designated, in
  the manner provided by  law,  as  depositories  of  the  funds  of  such
  municipal  corporation.  The comptroller or the chief fiscal officer may
  invest the monies in such fund in obligations specified in  paragraph  d
  of this subdivision. Any interest earned or capital gain realized on the
  money  so  deposited or invested shall accrue to and become part of such

  fund. The separate identity of such fund shall be maintained whether its
  assets consist of cash or investments or both.
    (d)  Monies  in  such fund may be invested (1) in special time deposit
  accounts in, or certificates of deposit  issued  by,  a  bank  or  trust
  company  located  and authorized to do business in this state, provided,
  however, that such time deposit account or certificate of deposit  shall
  be  payable  within  such  time  as  the  proceeds may be needed to meet
  expenditures for which such monies were obtained  and  provided  further
  that such time deposit account or certificate of deposit be secured by a
  pledge  of obligations of the United States of America or obligations of
  the state of New York  or  obligations  of  any  municipal  corporation,
  school district or district corporation of the state of New York; or (2)
  in obligations of the United States of America, obligations of the state
  of  New  York  or  obligations  of  the  municipal corporation which has
  established such mortgage insurance fund provided: (i) such  obligations
  are not tax exempt; (ii) such obligations shall be payable or redeemable
  at  the  option  of  the  owner within such times as the proceeds may be
  needed to meet  expenditures  for  purposes  for  which  the  monies  so
  invested were obtained, and (iii) such obligations, unless registered or
  inscribed  in  the  name  of  the  municipal  corporation for which such
  investment is made, shall be purchased through, delivered to and held in
  custody of a bank or trust company in this state and shall  be  sold  or
  presented  for  redemption or payment only by such bank or trust company
  upon written instructions from the comptroller or chief fiscal officer.
    (e)  An  expenditure  shall  be  made  from  such  fund  only  by   an
  authorization of the supervising agency with the consent and approval of
  the mayor and only for one or more of the following purposes:
    (i) Payment of expenses of establishing and administering the fund;
    (ii)  Payment  of a delinquent installment or installments of interest
  and principal due to the municipality under a mortgage  loan,  temporary
  loan or advance to a municipally-aided project;
    (iii) Payment of any loss sustained by the municipality as a result of
  the  making  of a loan, temporary loan or advance to a municipally-aided
  project, whether such loss consists of a  deficiency  upon  a  mortgage,
  foreclosure  sale  as authorized by sections thirty-four and ninety-four
  of this chapter or otherwise; except that in the event the  municipality
  acquires  title to the project, payment for any loss or deficiency shall
  be deferred until such time when the municipality shall dispose of title
  to the project; any such loss or deficiency shall be diminished  by  the
  municipality  to  the  extent  of the amount derived by the municipality
  from such disposition plus any  net  operating  income  derived  by  the
  municipality  during  its  period of ownership or less any net operating
  loss sustained by the municipality  during  such  period  and  less  any
  amount  of  interest  paid  by  the  municipality  to  retire any bonded
  indebtedness incurred in connection with the loan made to such project.
    (iv) Payment of all costs entailed in procuring mortgage insurance  in
  such  amounts,  and  from  such insurers as the supervising agency deems
  desirable to insure the municipality against any loss resulting from the
  making of a mortgage loan to a municipality-aided project.
    The  payment  from  such  fund  of  any  delinquent   installment   or
  installments  due  the  municipality  under  a  mortgage  as provided in
  subsection (ii) of this  paragraph  e  shall  not  be  deemed  either  a
  remission or waiver of the right to such installment or installments and
  such installment or installments shall continue to be due and payable to
  the municipality and shall be deposited, together with interest accrued,
  in the mortgage insurance fund when paid.
    (f)  The  comptroller  or  chief  fiscal officer shall keep a separate
  account for the mortgage insurance fund. Such account shall show:

    (i) The date and amount of each sum paid into the fund;
    (ii) The interest earned by the fund;
    (iii)  The  capital  gains  or  losses  resulting  from  the  sale  of
  investments of the fund;
    (iv) The interest or capital gains which have accrued to the fund;
    (v) The amount and date of each withdrawal from the fund;
    (vi) The assets of the fund indicating the cash balance therein and  a
  schedule of the amounts invested.
    The comptroller or chief fiscal officer shall render a detailed report
  of  the  operation  and condition of such fund to the supervising agency
  annually each fiscal year and at such other  times  as  the  supervising
  agency or the mayor may require.
    8.  Whenever  reference is made in this article to a municipal loan, a
  loan by a municipality, a loan from a municipality,  a  contract  for  a
  loan  between  a  municipality  and a company, or any similar term, with
  respect to the territorial limits of the city  of  New  York  such  term
  shall  be construed to refer to a loan made or to be made either by such
  municipality or by the New York city  housing  development  corporation,
  whichever is applicable.
    9.  The  city  of  New  York shall have the power to invest jointly or
  participate in a  loan  with  the  New  York  city  housing  development
  corporation  or  with one or more organizations or entities mentioned in
  section fifteen in a bond or note and single participating mortgage,  or
  in separate bonds or notes and separate mortgages of a company organized
  pursuant  to  the  provisions  of  this  article  upon  such  terms  and
  conditions as are provided in said section fifteen of this article.
    10. A municipality with a population of less than one million may,  by
  action  of  its local legislative body concurred in by the commissioner,
  provide for the supervision  and  regulation  of  any  municipally-aided
  project and the company carrying out such project by the commissioner in
  lieu  of  the  supervising  agency. With respect to any such project and
  company, the commissioner shall have, from and after the effective  date
  of  such  action,  all  of the powers and duties of a supervising agency
  pursuant to this article. The company  shall  pay  to  the  commissioner
  fees,  as  prescribed  by  the  commissioner,  to  cover the expenses of
  examination, audit, and supervision of  the  company  and  the  project.
  Notwithstanding  any other provision of law, funds collected pursuant to
  such fees shall be deposited to the credit of the general fund.
    The provisions of subdivisions one and eight  of  this  section  shall
  apply  only to projects financed in whole or in part by a mortgage loan,
  temporary  loan  or  advance  by  a  municipality.  The  provisions   of
  subdivisions two, three, four, five, six and seven hereof shall apply to
  all  municipally-aided  projects including projects financed in whole or
  in part by a mortgage loan from the federal government or any agency  or
  instrumentality  thereof  or  by a mortgage or mortgage bonds insured by
  the federal government or any agency or instrumentality thereof.