Section 402. Loans to owners

1.  Notwithstanding the provisions of any
  general, special or local law, a municipality, by such officer or agency
  as determined by its local legislative body,  is  hereby  authorized  to
  make  or  contract  to  make  loans  to  the owners of existing multiple
  dwellings within its territorial limits, subject to the  limitations  in
  subdivision  two of this section, in such amounts as may be required for
  the  installation  of  proper  heating  facilities,  or  elimination  of
  conditions  dangerous  to human life or detrimental to health, including
  nuisances as defined in section  three  hundred  nine  of  the  multiple
  dwelling  law,  or  other rehabilitation or improvement of such multiple
  dwellings, and if such owner acquires  the  multiple  dwelling  for  the
  purposes  of  such  rehabilitation  or  improvement or owns the multiple
  dwelling subject to an outstanding indebtedness, such loans may  include
  such  amounts as may be required for the cost of such acquisition or for
  the refinancing of such outstanding indebtedness, and may make temporary
  loans or advances to  such  owners  in  anticipation  of  the  permanent
  municipal loans for such purposes.
    2-a.  As  used in this section the term "value" shall mean the "as is"
  value of the multiple dwelling and the land upon which  it  is  situated
  prior   to  such  installation,  elimination,  other  rehabilitation  or
  improvement referred to in subdivision one  of  this  section  plus  the
  total  of all costs of such installation, elimination, rehabilitation or
  improvement including, but not limited to,  the  costs  of  any  or  all
  undertakings  necessary  for the planning, financing, tenant relocation,
  acquisition,  construction,  equipment  and  development  in  connection
  therewith.
    2-b.  (a)  Each permanent loan shall be secured by a bond and mortgage
  or note and mortgage upon the multiple dwelling and the land upon  which
  it is situated; where the loan is made to an owner who is a lessee, such
  loan shall be secured by a first lien on such property.
    (b)  The  amount  of  any  such  loan shall not exceed the cost of the
  installation of proper heating facilities, or elimination of  conditions
  dangerous to human life or detrimental to health, including nuisances as
  defined  in  section three hundred nine of the multiple dwelling law, or
  other rehabilitation or improvement provided that,  if  any  portion  of
  such  loan  is  used  for  the  cost  of acquisition of the land and the
  multiple dwelling or for re-financing, the total  amount  of  such  loan
  shall not exceed two times the cost of such installation, elimination of
  such conditions, rehabilitation or improvement.
    (c) The amount of any such loan, together with the amount of all prior
  liens  and  encumbrances, shall not exceed, except in the case of a loan
  made to a non-profit company, a mutual company, or a housing development
  fund company, ninety per centum of the  value  of  the  property,  after
  completion   of  the  installation  of  proper  heating  facilities,  or
  elimination of such conditions or other rehabilitation  or  improvement,
  as   estimated  by  the  agency,  unless  the  agency  makes  a  written
  determination that the owner has insufficient resources to pay  for  the
  remaining  ten per centum of the value of the property, after completion
  of  such  installation,  elimination,   or   other   rehabilitation   or
  improvement,  as  estimated by the agency, in which case such loan shall
  not exceed ninety-five per centum of the value of  the  property,  after
  completion   of  the  installation  of  proper  heating  facilities,  or
  elimination of such conditions or other rehabilitation  or  improvement,
  as  estimated  by the agency. The amount of any such loan, together with
  the amount of all prior liens and encumbrances,  made  to  a  non-profit
  company,  a  mutual company, or a housing development fund company shall
  not  exceed  the  value  of  the  property  after  completion  of   such
  installation,  elimination,  or  other rehabilitation or improvement, as

  estimated by the agency provided that  when  after  completion  of  such
  installation,  elimination  or other rehabilitation or improvement, such
  project is, or is to be operated exclusively for the benefit of  persons
  or  families  who  are  entitled  to occupancy by reason of ownership of
  stock in the corporate owners, such loan shall not  exceed  ninety-eight
  percentum  of  the  value  of  the  property,  after  completion of such
  installation, elimination, or other rehabilitation  or  improvement,  as
  estimated by the agency, unless the agency makes a written determination
  that  the  owner has insufficient resources to pay for the remaining two
  per centum of the value  of  the  property,  after  completion  of  such
  installation,  elimination,  or  other rehabilitation or improvement, as
  estimated by the agency, in which case such loan shall  not  exceed  the
  value   of   the   property,  after  completion  of  such  installation,
  elimination, or other rehabilitation or improvement, as estimated by the
  agency.
    * (d) Each such bond and mortgage or note and mortgage shall be repaid
  over or within a period of  thirty  years  in  such  manner  as  may  be
  provided in such bond and mortgage or note and mortgage and contract but
  in no case to exceed the probable life of the multiple dwelling which is
  hereby determined to be thirty years. Such bond and mortgage or note and
  mortgage  and  the  contract  in  connection  with  such  permanent  and
  temporary  loans  may  contain  such  other  terms  and  provisions  not
  inconsistent   with   the  provisions  of  this  article  as  the  local
  legislative body or the agency may deem necessary or desirable to secure
  repayment of the  loan,  the  interest  thereon  and  other  charges  in
  connection  therewith  and  to  carry out the purposes and provisions of
  this article; notwithstanding the foregoing, (i) a loan  made  prior  to
  January  first, nineteen hundred seventy-eight may, in the discretion of
  the agency, be extended to a term up to forty-five years, and  (ii)  the
  agency,  in  its  discretion,  may either extend the mortgage securing a
  loan that has been subordinated to another mortgage loan that is held or
  insured by the federal  government  or  any  agency  or  instrumentality
  thereof,  the federal home loan mortgage corporation or Fannie Mae until
  the end of the term of any such other mortgage loan held or  insured  by
  such  other  entity,  or  replace the mortgage securing such loan with a
  substitute mortgage, which may have a term which runs until the  end  of
  the  term  of any such other mortgage loan held or insured by such other
  entity, provided, however, that the proceeds of any such  mortgage  loan
  held   or   insured   by   the  federal  government  or  any  agency  or
  instrumentality thereof, the federal home loan mortgage  corporation  or
  Fannie  Mae,  shall be used only for satisfaction of existing mortgages,
  payment of real property taxes,  water  and  sewer  charges,  costs  for
  necessary repairs or replacements, costs directly and reasonably related
  to  the  refinancing  as  approved  by  the  agency,  and the funding of
  reserves for replacements or such other escrows or reserves  as  may  be
  required  by  the  mortgagee. The agency may modify the rate and time of
  payment of interest on the original  loan  and  the  rate  and  time  of
  amortization  of  principal in such manner as required to secure payment
  of the loan or substitute mortgage within the extended term.
    * NB Effective until September 9, 2009
    * (d) Each such bond and mortgage or note and mortgage shall be repaid
  over or within a period of  thirty  years  in  such  manner  as  may  be
  provided in such bond and mortgage or note and mortgage and contract but
  in no case to exceed the probable life of the multiple dwelling which is
  hereby determined to be thirty years. Such bond and mortgage or note and
  mortgage  and  the  contract  in  connection  with  such  permanent  and
  temporary  loans  may  contain  such  other  terms  and  provisions  not
  inconsistent   with   the  provisions  of  this  article  as  the  local

  legislative body or the agency may deem necessary or desirable to secure
  repayment of the  loan,  the  interest  thereon  and  other  charges  in
  connection  therewith  and  to  carry out the purposes and provisions of
  this  article;  notwithstanding  the  foregoing,  a  loan  made prior to
  January first, nineteen hundred seventy-eight may, in the discretion  of
  the agency, be extended to a term up to forty-five years. The agency may
  modify the rate and time of payment of interest on the original loan and
  the  rate  and  time  of  amortization  of  principal  in such manner as
  required to secure payment of the loan within the extended term.
    * NB Effective September 9, 2009
    2-c. If a loan pursuant to  this  article  is  made  to  a  non-profit
  company  or  a  housing development fund company which agrees to provide
  housing accommodations exclusively  for  persons  and  families  of  low
  income,  at  least  thirty  percent  of  whom  are referred to it by the
  municipality  and  have  prior  to  their  initial  occupancy  in   such
  accommodations resided in emergency shelter facilities operated by or on
  behalf  of  the  municipality,  the agency may provide that the note and
  mortgage shall automatically be reduced to zero  in  five  equal  annual
  decrements  commencing  on  the  tenth  year after the initial occupancy
  date, provided that such accommodations have been owned and operated  in
  a manner consistent with an agreement with the municipality contained in
  such note and mortgage to provide housing for such persons.
    3.  The bond or note issued by the owner of such multiple dwelling and
  the mortgage relating thereto may authorize such owner, with the consent
  of the agency, to prepay the principal of the loan subject to such terms
  and conditions as therein provided. Such bond or note and  mortgage  may
  contain such other clauses and provisions as the agency shall require.
    4.  The  agency  may  charge  the  owner  of  such  multiple  dwelling
  reasonable fees for financing, regulation, supervision and  audit.  Such
  fees shall be kept by the municipality in a separate fund to be known as
  the  housing  rehabilitation  fund  and  shall  be  used  to pay for the
  expenses of the municipality  in  administering  and  carrying  out  the
  provisions of this article.
    5.  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  an owner, or any similar term, with
  respect to the territorial limits of the city of  New  York  such  terms
  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.
    6.  The  bond and mortgage or note and mortgage issued by the owner of
  any such multiple dwelling may provide that the loan shall be reduced to
  zero commencing on the fifteenth year after the execution  of  the  bond
  and  mortgage or note and mortgage, provided that, as of the date of any
  such reduction, the multiple dwelling has been and continues to be owned
  and operated in a manner consistent with a regulatory agreement with the
  municipality. Notwithstanding such provision as contained  in  the  bond
  and  mortgage  or  note  and mortgage, the loan shall be reduced to zero
  only if, prior to or simultaneously  with  delivery  of  such  bond  and
  mortgage  or  note and mortgage, the agency made a written determination
  that  such  reduction  would  be  necessary  to  ensure  the   continued
  affordability  or  economic  viability  of  the  multiple dwelling. Such
  written determination shall document the basis upon which the  loan  was
  determined to be eligible for evaporation.