Legislature Passes Bill To Make SONYMA Mortgages More Attractive

NEW YORK, NY (06/21/2007)(readMedia)-- Priscilla Almodovar, President and Chief Executive Officer of the State of New York Mortgage Agency (SONYMA), today commended the State Legislature for passing a bill that will greatly enhance the attractiveness of SONYMA mortgages and boost the agency’s efforts to market its mortgages to low- and moderate-income first-time homebuyers.

The measure will allow SONYMA to reimburse borrowers required to pay the federal recapture tax, which SONYMA borrowers may be liable for subject to certain conditions such as time of sale, sale price and the income of the borrower.

Governor Spitzer is expected to sign the legislation into law.

“This bill is part of our efforts to improve the marketability of SONYMA mortgages. The ‘recapture tax’ causes undue concern and worry in what can already be an overwhelming process for many working families buying their first home,” Ms. Almodovar said. “What we at SONYMA and other housing agencies throughout the country have found is that few borrowers will ever be liable for the tax.

“Nevertheless, the stigma is there and it discourages buyers from considering our product. Combined with simplifying our underwriting process and offering new and more flexible mortgages, this legislation will allow SONYMA to give potential applicants peace of mind when applying for our mortgages.”

The bill was sponsored by Assemblyman Vito Lopez (D- Brooklyn) and Senator John Bonacic (R/I/C-Mount Hope).

Assemblyman Lopez said, “I'm proud to have sponsored this legislation to enhance affordable home ownership opportunities. I will continue to work to make the dream of home ownership possible for all residents of New York State.”

Senator John J. Bonacic stated, “Anytime there is an opportunity to eliminate the impact of a tax that penalizes first time home buyers, we should act on it. This legislation, which I was pleased to sponsor, will not only reimburse borrowers required to pay the federal recapture tax, it will also make SONYMA mortgages more desirable to working families looking to purchase their first home.”

The federal recapture tax has been a major obstacle to marketing SONYMA mortgages. Under the tax, if a home purchased with a SONYMA mortgage is sold within nine years—and the owner’s income has significantly increased and the value of the home has increased during that period—then the owner could be liable for the federal recapture tax.

In reality, very few SONYMA borrowers are required to pay the tax. However, the threat of that tax liability often deters potential homebuyers from seeking a SONYMA loan, which can significantly reduce a homeowner’s monthly carrying charges.

Under the legislation approved by the Legislature, SONYMA would be authorized to reimburse its borrowers should they be held liable for the federal recapture tax after sale of their home. Because the tax is assessed so infrequently and because SONYMA is a self-supporting agency, SONYMA estimates that the bill would have no fiscal impact on the state.

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SONYMA was created in 1970 with the mission of helping low- and moderate- income families become homeowners. It offers a variety of low down payment mortgages that provide below-market fixed interest rates, as well as closing cost assistance through a network of participating lenders across the state.

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