Governor Signs Bill to Encourage SONYMA-Insured Refinancing of "Overleveraged" Apartment Buildings

NEW YORK, NY (08/02/2010)(readMedia)-- Governor David A. Paterson has signed legislation that will enable New York State to help refinance apartment buildings that ran into severe financial difficulties as a result of the housing crisis. The new law will allow the State of New York Mortgage Agency (SONYMA) to insure loans that refinance these "overleveraged" buildings that are now struggling to pay their debt service.

By enabling SONYMA's Mortgage Insurance Fund to insure these types of refinancings, the bill will encourage preservation loans and protect neighborhoods put at risk by overleveraged apartment buildings. The bill was sponsored by Assemblyman Hakeem Jeffries, D-Brooklyn, and Senator Velmanette Montgomery, D-Brooklyn, whose central Brooklyn districts include many multifamily buildings suffering from financial distress.

"The housing crisis created many victims, including the tenants of apartment buildings that were often recklessly financed during the housing boom," Governor Paterson said. "This legislation will enable both rental and condo buildings to be refinanced so their tenants can help their communities grow and prosper."

Assemblyman Jeffries said, "As a result of the housing market collapse, there are thousands of empty luxury condominium apartments all throughout New York City. At the same time, working families and middle class communities are being suffocated out of existence by the squeeze of the affordable housing crisis. By signing this bill into law, Governor Paterson has provided us with a powerful tool to help convert excess luxury apartment inventory into affordable homes for those most in need."

Senator Montgomery said, "From the roof of my district office I can see dozens of new luxury condominium towers standing empty, or so undersold their continued existence is in jeopardy. Thousands of empty units, many of which were built on sites where affordable and low-income housing was displaced so these new structures could rise. Failed buildings are disastrous for a neighborhood, so I was very happy when Assemblyman Jeffries approached me with his idea to save the neighborhoods, the buildings, and many units of affordable housing with this bill. I am proud to have carried it in the Senate. By signing this bill, the Governor can provide confidence and stability to the housing markets and our neighborhoods."

Assembly Housing Chair Vito Lopez, D-Brooklyn, said, "This legislation is an important step toward resolving the critical issue of overleveraged apartment buildings in New York City. As Chairman of the Committee on Housing, I was proud to work closely with Assemblyman Jeffries, SONYMA and the Governor's office to ensure that we gain this critical tool to help us improve and protect affordable housing in the city."

Majority Conference Leader John Sampson, D-Brooklyn, said, "In the current economic climate, people need adequate and affordable housing. After much hard work with the Governor and SONYMA, this legislation will now be signed into law--successfully protecting and rebuilding neighborhoods put at risk by the financial crisis. I am proud that we have provided the tools necessary to refinance overleveraged apartment buildings and convert unfinished condos into affordable rental housing. This measure will improve the lives of everyday New Yorkers."

Brian E. Lawlor, President and CEO of "nyhomes," SONYMA's parent agency, and Commissioner of the Division of Housing and Community Renewal, said, "We were proud to work with the Legislature and the Governor to craft legislation that will preserve affordable housing in New York. Strengthening communities is one of the core missions as we continue to integrate our agencies. We look forward to working with the development and lending communities to help refinance multifamily housing in distress."

Many owners of rental apartment buildings in New York City acquired or refinanced during the housing boom have since fallen behind on their mortgage payments or defaulted. As a result, building services have not been maintained and the quality of life in those buildings has deteriorated.

In addition, many recently-built multifamily condo apartment buildings remain unoccupied as developers have run into financial difficulties. This has created neighborhood eyesores and negatively affected retail stores and community activities.

Refinancing these buildings would allow rental properties to be properly maintained and enable unoccupied condos to be turned into affordable rental apartments.

Making SONYMA insurance available for preservation loans could reduce the overall cost of refinancing and encourage lenders and developers to refinance overleveraged buildings.

The legislation signed by the Governor removes a requirement that refinancings of multifamily mortgages insured by SONYMA include renovation of the property. Under the new law, SONYMA will be able to insure refinanced mortgages of up to $150 million for properties originally financed between 2004 and 2008.

SONYMA's Mortgage Insurance Fund has long been recognized in the housing industry for strong financials and its commitment to affordable housing. SONYMA will utilize its standard underwriting criteria in evaluating refinancing projects and each project must be approved by the SONYMA board of directors.

The legislation signed into law continues SONYMA's efforts to help New York City neighborhoods put at risk by the financial crisis. The Mortgage Insurance Fund has already insured the mortgages of several unsold condo buildings that have converted to rental apartments.

And last year, SONYMA's single-family mortgage program lowered its presale requirement for potential homeowners looking to finance the purchase of condos located in "target" areas. "Target" areas are neighborhoods that are considered economically distressed. Under the new policy, only 40% of the units in a condominium development must now be sold for an individual condo to become eligible for a SONYMA mortgage.

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SONYMA's Mortgage Insurance Fund was created in 1979 to provide insurance on multifamily mortgage loans for affordable housing made by commercial and public lenders and mortgage pool and primary insurance for single family mortgages purchased by SONYMA.

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