Current through Register Vol. 46, No. 12, March 20, 2024
(a) These
guidelines apply to all mortgage modification agreements whereby a housing
company seeks to qualify for moneys from the Project Repair Fund.
(b) The existence of a 20-percent or $10 per
room per month difference between current rent and total economic rent at an
HFA-financed housing project will not automatically qualify that project for a
mortgage modification agreement. Rather, the existence of that situation shall
be considered a necessary but not a sufficient test or criterion that must be
met if a mortgage modification agreement is to be valid. Mortgage modification
agreements must also satisfy or meet the other guidelines for mortgage
modifications approved by the director of the Division of the Budget as set
forth in these guidelines.
(c)
Applicants for mortgage modifications shall demonstrate, in a manner
satisfactory to the agency, that all reasonable efforts to manage a project
economically and efficiently, to minimize project operating costs, and to
secure available Federal subsidies or grants that may be used to increase
project income or to effect energy conservation improvements, have been taken.
In making this determination, the agency shall consider the findings and
recommendations of the commissioner made pursuant to paragraph (i)(2) of this
section. Applications for rent or carrying charge increases should not be
delayed, nor should project expenditures be allowed to increase without
sufficient cause, so that a project may eventually qualify for a mortgage
modification.
(d) Mortgage
modification agreements may be made only in those cases when a housing project
is unable or will be unable, as determined by the commissioner of the Division
of Housing and Community Renewal (the commissioner) and the executive director
of the Housing Finance Agency, to fully satisfy, on a timely basis, its
obligations for debt service, water and sewer or property tax payments for an
extended period.
(e) The inability
of a housing project to make payments into reserve accounts or to generate a
return on owner's equity because of a shortfall in total project revenues will
not be sufficient to qualify that project for a mortgage modification. However,
in order to be eligible for a mortgage modification, projects will not be
required to fully expend or disburse the balance of their escrow or reserve
funds.
(f) The commissioner shall
certify that:
(1) the project has an approved
operating budget for the current fiscal year as required by section
32-a of the Private Housing Finance
Law;
(2) no expenditures have been
made by the project in the current fiscal year except as authorized by that
budget, or as authorized by the commissioner or his designated representative;
and
(3) he has reviewed the
project's operating budget for the current fiscal year in light of the need for
a mortgage modification and in recognition that the project may fail to make
timely and full debt service payments, and has therefore approved only those
expenditures necessary to protect the health and safety of tenants and to
maintain the project in a habitable condition.
(g) The necessity for setting carrying
charges or rents below the level of current economic rent shall be
demonstrated, together with market surveys and analyses where appropriate. Only
in extraordinary circumstances shall the carrying charges or rents be below the
level of current economic rent for the full 75 months permitted by section
60(3)(b) of the Private
Housing Finance Law.
(h) Only one
mortgage modification agreement may be made for any housing project.
(i) There shall be:
(1) an analysis that explains why a mortgage
modification, rather than a foreclosure of the project's mortgage lien, is
preferred and is in the best interests of the State;
(2) an evaluation, to be prepared by the
commissioner of the Division of Housing and Community Renewal, of the quality
of the management of the housing project. That evaluation shall identify
existing and potential management problems at the project, particularly those
management practices which have a negative effect upon occupancy rates, the
collection of rents, building maintenance, operating costs, and the efficient
operation of the project in general. The commissioner shall also recommend
appropriate remedies for the problems identified in his evaluation of the
management of the project and shall review and approve a management improvement
plan for the project;
(3) if the
housing project has applied for project repair funds as well as for a mortgage
modification, in addition to the other evaluations or analyses required as
specified in these guidelines, the mortgage modification application shall
include a copy of the certification prepared by an independent consultant
engaged by HFA as required by paragraph (a) of subdivision 3 of section
60 of the Private Housing Finance
Law;
(4) an estimated operating
budget for the project to be prepared by the commissioner of the Division of
Housing and Community Renewal, for the duration of the mortgage modification
period that shows all anticipated project revenues and expenditures and the
average annual carrying charges, rental rates or other fees necessary to
produce those revenues. The estimated budget shall also show and explain the
economic assumptions, inflation rates, vacancy rates and other factors
affecting project costs and revenues which were used in order to develop the
estimated operating budget;
(5) an
estimate prepared by the Housing Finance Agency of the probable impact of the
mortgage modification agreement upon the relevant debt service fund of the
agency, and of the amounts which the State may be asked to appropriate to that
fund under the moral obligation provisions of the HFA bond covenants;
(6) a schedule showing the increases in
rents, carrying charges, equity contributions, garage rents, commercial space
rentals or other charges imposed by the mortgagor which will be implemented
during the period of the mortgage modification;
(7) a statement of all debt service, water
and sewer, and property tax arrearages accumulated by the project before the
beginning of the mortgage modification period, as well as an estimate of the
arrearages that will accumulate during the period of the mortgage modification,
and a schedule for the repayment of all such arrearages that is in accordance
with Private Housing Finance Law, section
60(3)(b).
(j)
(1) The Executive Director of the Housing
Finance Agency and the Commissioner of the Division of Housing and Community
Renewal shall notify the Director of the Division of the Budget, as soon as is
practical under the circumstances, that a housing company has applied for or
expressed an interest in obtaining:
(i)
project repair funds; or
(ii) a
mortgage modification agreement necessary to qualify that project for the
receipt of project repair funds.
(2) The director of the Division of the
Budget and his staff shall be kept fully informed of the progress of
negotiations among HFA, the housing project and DHCR concerning proposed grants
for the correction of construction defects from the Housing Project Repair Fund
and any mortgage modification necessary to qualify a project to receive those
monies.
(3) The director of the
Division of the Budget and his staff shall have access to and shall be supplied
with draft copies of:
(i) all proposed
mortgage modification agreements; and
(ii) consultant's reports developed pursuant
to paragraph (a) of subdivision 3 of section
60 of the Private Housing Finance Law; as
such are exchanged among the parties to the negotiations, so that the impact of
those agreements or reports upon the fiscal resources of the State may be
evaluated.
(4) The
director of the Division of the Budget and his staff shall have the opportunity
to comment upon and make recommendations for changes to those agreements and
reports.
(k) Before any
mortgage modification agreement to which these guidelines are applicable is
recorded, the director of the Division of the Budget shall have certified that
such agreement complies with these guidelines, or that any noncompliance has
been waived pursuant to subdivision (n) of this section.
(l) When a housing company has requested
monies from the Project Repair Fund, and shall have demonstrated to HFA the
reasonable likelihood of the existence of construction defects, HFA shall
engage a consultant to assess the physical condition of the housing project
involved. That assessment shall identify any existing physical defects at the
project, determine the extent to which those defects constitute construction
defects, identify potentially necessary repairs and replacement, provide an
opinion as to the adequacy of the project replacement reserves and otherwise
conform to section
60(3)(a) of the Private
Housing Finance Law.
(m) HFA shall
recommend to the director of the Division of the Budget an allocation of
appropriated and available monies of the Project Repair Fund among qualifying
housing companies in accordance with the immediacy and necessity of repairs and
availability of funds.
(n) The
director of the Division of the Budget reserves the right to modify, amend or
add to the mortgage modification guidelines set forth above, or to waive any
guideline in order to protect the interests of the State.
