New York Laws
Part 1
2405 - Purchase of Existing Mortgages.

(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 superintendent of financial
services 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
department of financial services, 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 or second lien on the
real property described to the agency in accordance with subdivision
five of section twenty-four hundred two of this part 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 financial services 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 23, 2025
* § 2405. Purchase of mortgages. (1) The purpose of the agency shall
be to purchase mortgages from banks within the state during periods when
there is an inadequate supply of credit available for new residential
mortgage loans 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 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 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.
(3) (a) The agency shall require as a condition of purchase of
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 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, such new mortgages 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 individual
borrowers on such new loans, notwithstanding the maximum interest rate
fixed by section 5-501 of the general obligations law, at the rate that
the 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 mortgage loans.
Each such bank 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 superintendent of
financial services 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 mortgages would have yielded
if the interest thereon had been at the maximum rate chargeable
individual borrowers on such new loans 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 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
department of financial services, 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 mortgage
loans 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 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 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
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 his 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 or second lien on the
real property described to the agency in accordance with subdivision
five of section twenty-four hundred two of this part 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 loan 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 financial services 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 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
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 mortgage is purchased by
the agency shall enter a contract to service such mortgage and account
to the agency therefor.
(10) The agency shall maintain a continuous review of the availability
of funds in regular banking channels for new mortgage loans. In the
event that the agency shall determine that an adequate supply of funds
exists in regular banking channels for new mortgage loans 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.
* NB Effective July 23, 2025