NYS Municipal Bond Bank Agency Resolves Tax Lien Securitization Trust

NEW YORK, NY (09/11/2007)(readMedia)-- The State of New York Municipal Bond Bank Agency (MBBA) announced today that it is taking steps to end the tax lien securitization trust created in 2003 and plans to return any remaining tax liens to participating cities by the end of the year.

By returning the outstanding liens, the underlying properties become eligible for possible funding from the Restore New York Communities Initiative, a state program run by Empire State Development (ESD). Restore New York allows local municipalities to access funds to demolish or rehabilitate vacant, abandoned, condemned and surplus properties through an application process that is currently underway.

“In 2003, the tax lien trust provided revenues to several upstate cities in a time of critical fiscal need,” said Priscilla Almodovar, President and Chief Executive Officer of MBBA. “However, collection on the liens and sales of properties foreclosed by the trust did not occur at the expected rate. In particular, many of the properties in the City of Buffalo remain vacant or abandoned. By ending the trust, we are able to return the liens to the cities, enabling them to compete for much-needed funds from ESD to improve or demolish the properties. We will continue to work with the cities to further their plans to strengthen neighborhoods and improve their housing stock.”

In addition to ending the trust, HFA has begun discussions with nonprofit organizations in Buffalo to help fund the rehabilitation of properties whose liens were in the program, as well as other properties, through its sister agency, the New York State Affordable Housing Corporation.

The State Legislature in 2000 authorized MBBA to create a securitization program to provide financial aid to any municipality that wanted to realize revenue from uncollected real estate taxes. In 2003, in the only transaction under the program, MBBA set up a securitization initiative with the cities of Buffalo, Syracuse, Binghamton and Plattsburgh.

Under the program, MBBA created a trust that sold more than $15.1 million in bonds to institutional investors. That revenue was used to purchase delinquent property tax liens from the four cities. The trust then pursued collection of the unpaid taxes from property owners, using those funds to pay off the bonds.

The program generated an immediate cash infusion for all four cities: $4.3 million for Buffalo, nearly $6.4 million for Syracuse, almost $1.9 million for Binghamton and $109,000 for Plattsburgh.

Most of the liens on properties in Syracuse and Plattsburgh were resolved successfully. While the Binghamton properties originally performed as expected, the floods in June 2006 hampered the performance of the remaining properties. However, from inception, the Buffalo properties underperformed relative to the entire portfolio, prompting dissolution of the trust.

As of today, 1,039 of the original 1,499 Buffalo liens owned by the trust were determined to have no value and have been returned to the City of Buffalo. The 356 liens that remain unresolved are expected to be sold or returned to the city by the end of the year. MBBA is also in negotiations with the City of Binghamton that could lead to the return of outstanding liens in the near future. Of the original 360 Binghamton liens, 107 are unresolved. In the other cities, 25 of Syracuse’s 1,649 liens are unresolved and one of Plattsburgh’s 26 liens is unresolved.

To end the trust, a settlement was reached with the bondholders. Prior to the settlement, $8.6 million of the bonds were outstanding. Last month, MBBA settled with the bondholders for $5.34 million. MBBA was also able to reach concessions from the legal and financial advisors involved in the transaction to subordinate, reduce or return their fees. With the settlement, the MBBA now plans to resolve or return the outstanding liens to the cities. When those actions are completed, the trust will be terminated.

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MBBA was created in 1972 to provide municipalities with access to the capital markets for special programs.

AHC, a subsidiary of NYS Housing Finance Agency, was established in 1985 to promote homeownership by low- and moderate-income households by providing financial assistance approved by the State Legislature for the construction, acquisition, rehabilitation and improvement of owner-occupied housing.

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