New York State Moves to Make SONYMA Mortgages More Attractive

NEW YORK, NY (07/17/2007)(readMedia)-- New York State has just taken several major steps to make below-market interest rate mortgages offered by the State of New York Mortgage Agency (SONYMA) more attractive.

SONYMA announced that purchase price limits have been increased for homes purchased downstate with SONYMA mortgages.

“Although the federal government sets purchase price limits for our first-time homeowner programs, we are permitted to use more accurate and comprehensive local information to set higher limits, and we have done so,” said Priscilla Almodovar, President and Chief Executive Officer of SONYMA. “With these new limits, a first-time homebuyer downstate will be able to choose from a wider range of existing and new homes, which means more low- and moderate-income families will be eligible for our mortgages.”

SONYMA also announced that effective July 17, 2007, it will reimburse its borrowers should any federal recapture tax be imposed when they sell their homes. On July 9th, Governor Eliot Spitzer signed legislation that allows SONYMA to reimburse its mortgage holders for liability from the federal recapture tax.

“Our programs are designed to help low- to moderate-income individuals buy their first home, but the recapture tax too often discouraged prospective borrowers from seeking SONYMA mortgages,” Ms. Almodovar said. “By offering reimbursement, our borrowers will have one less thing to worry about.”

New Purchase Price Limits

Despite SONYMA’s favorable terms, the high cost of housing in the downstate area has often meant that otherwise eligible homebuyers were unable to seek SONYMA financing. Following an extensive study of home purchase price data in the metropolitan area, SONYMA determined that it could increase the maximum purchase price above the ceilings set by the Internal Revenue Service for downstate homes.

The higher purchase price limits will apply to homes purchased in New York City, Long Island and Westchester, Rockland and Putnam counties. Buyers of one-family homes, condominiums and cooperatives will be eligible.

The new purchase price limits increase the ceiling for existing homes to $467,000 from the current $429,610—an 8.7% increase. For newly built homes, the limit will increase to $460,300 from the current $429,610—an increase of 7.14%. Even higher purchase limits will apply for homes located in “target areas,” which are generally defined as economically disadvantaged areas.

For details on the new purchase price limits, please visit the SONYMA website at: http://www.nyhomes.org/home/index.asp?page=146

Federal Recapture Tax Reimbursement

Under the federal recapture 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 offers significantly lower monthly charges than a conventional mortgage.

In addition, the mortgage insurance that most SONYMA borrowers are required to purchase may cover some or all of the recapture tax liability. That insurance policy, issued by Genworth Mortgage Insurance Corporation, covers any recapture tax liability up to $6,000 for loan amounts of $300,000 or less if a home is sold within five years of the original purchase. SONYMA is pleased that Genworth has taken this step, which could offset claims made by borrowers to the Agency to pay their recapture tax.

Under the bill approved by the Legislature and signed by the Governor, SONYMA would be authorized to reimburse borrowers for any recapture tax liability not covered by insurance. 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.

For more information on the federal recapture tax, please visit our website at: http://www.nyhomes.org/home/index.asp?page=301

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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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Posted Tuesday July 17, 2007 at 11:08 am by New York State Housing Finance Agency