New York Codes, Rules and Regulations
Title 9 - EXECUTIVE DEPARTMENT
Subtitle C - Division of the Budget
Part 153 - Guidelines For Mortgage Modification Agreements
Section 153.3 - Criteria established in statute for mortgage modifications

(a) Chapter 888 of the Laws of 1980 establishes explicit criteria that must be met before an HFA-financed housing project can qualify for a mortgage modification. The amendment also provides a framework or schedule for mortgage modifications by setting a statutory limit on the length of time that housing project rental rates may be held below the level of economic rent and that a housing project may take to pay its debt service and tax arrearages. The major statutory criteria that determine whether or not a project qualifies for a mortgage modification, and that specify the contents of an approved mortgage modification, are summarized below. This summary is not intended to be, nor should it be interpreted as, an exhaustive list of all of the statutory requirements imposed on mortgage modification agreements. The guidelines approved by the director are intended to complement those criteria and to resolve important issues concerning the content of mortgage modification agreements, which the amendment does not address.

(b) Eligible housing projects. The owners of a housing project may enter into an agreement modifying the terms of the mortgage on that project only if the imposition of total economic rent (rent levels which are high enough to generate revenues that are sufficient to pay all current costs of operating the project, plus accumulated arrearages) would require an increase in the project's rental rates or carrying charges of 20 percent or $10 per room per month, whichever is greater. (See section 60, Private Housing Finance Law.)

(c) Duration of the mortgage modification. As part of a mortgage modification agreement, a housing company and HFA may agree to vary rental rates or carrying charges at a housing project below the level of economic rent for as much as 75 months, so long as rents reach the level of current economic rent at the end of that period. Current economic rent is defined in the amendment to be the rent or carrying charges sufficient to provide for the payment of all current costs of operating a housing project, including payments into reserve funds, real property taxes, water and sewer charges and mortgage payments (see section 60, Private Housing Finance Law). However, the amendment also requires that certain arrearages, which are not included in the calculation of current economic rent, must be cured, as described in the next subdivision.

(d) Payment of arrearages. The statute establishes different requirements for the payment of three distinct types of housing project arrearages. Debt service arrearages that accumulate before a mortgage modification begins are to be repaid by the date that the project's mortgage was originally scheduled to terminate. Debt service arrearages that occur during the period of the mortgage modification agreement must be paid within 10 years of the termination date of that agreement. Also, all real property tax and water and sewer charge arrearages must be paid, with interest, within 15 years of the effective date of the initial variation in rental rates or carrying charges. (See section 60, Private Housing Finance Law.)