Chapter 175 of the laws of 1968
Urban development guarantee fund of N.Y.
Section 1. Short title. This act shall be known and may be cited as
the "Urban development guarantee fund of New York act".
Statement of legislative findings and purposes. The legislature
hereby finds that in certain urban areas of our state the growth of
small business is impeded by the unavailability of reasonable credit for
buildings, equipment, credit for inventory and working capital. This
unavailability of reasonable credit restricts business growth and job
opportunities and causes business failures resulting in unemployment and
underemployment with resulting persistent poverty in such urban areas.
The amelioration of these conditions is a responsibility of both the
public and private sector of our economy. Rehabilitation of the economic
life of blighted areas is necessary in order to prevent business
failures, to maintain the income of existing small business enterprises,
to provide a business climate conducive to the growth of new small
business enterprises, and to broaden the tax base of such urban areas,
all to afford more meaningful and rewarding business and job
opportunities for the residents of such areas, thereby reducing the
hazards of unemployment and raising the job opportunities of the
underemployed.
The legislature further finds that in certain urban areas of our state
the construction, reconstruction, rehabilitation and improvement of
housing accommodations is impeded by the shortage of mortgage funds at
reasonable interest rates and the lack of available credit for the
rehabilitation of older buildings which lack proper heating or sanitary
facilities or which do not comply in full with modern building and
maintenance code standards. The unaided efforts of private enterprise
have not provided and cannot provide an adequate supply of safe and
sanitary housing within the financial reach of many families in urban
areas. The upgrading and improvement of such areas through programs of
new construction, rehabilitation and home improvement can provide
additional tax revenues to the community and assist in attracting and
retaining business and industry.
In order to assist in the rehabilitation of these areas and give
constructive attention to the welfare of the needy residents of these
areas, the legislature finds and declares that the marshalling of public
and private capital to make sufficient credit available at the lowest
feasible interest rates to encourage the expansion of small business, to
provide the incentives for the establishment of sound new small business
enterprises and to promote the construction and rehabilitation of
housing accommodations in such areas, will create new job opportunities,
effectively reduce unemployment and strengthen the economic base of the
community as a whole, thereby reducing the burdens of poverty and need.
This result can best be accomplished by a loan guarantee program to
guarantee loans to small businesses and owners of housing
accommodations, including one and two family homes and multiple
dwellings, unable to obtain reasonable credit through conventional
financial sources. The legislature further finds that the adoption of
such a loan guarantee program to mitigate the economic and social evils
of unemployment, underemployment and inadequate housing is for a public
purpose, and to achieve these ends there should be created a non-profit
corporation to be known as the urban development guarantee fund of New
York, having such powers and duties as set forth herein.
Definitions. 1. "Small business" shall mean a business located in
an area having one or more of the characteristics described in section
two which is unable to obtain adequate financing to maintain a
stabilized work force or increase job opportunities by virtue of (a) its
location, (b) its net assets or (c) its dollar volume of business.
2. "Fund" shall mean the urban development guarantee fund of New York
created by section four of this act.
3. "Small business project" shall mean construction of any new
building, purchase of an existing building, or refinancing of an
existing building in order to facilitate substantial improvement
thereto, the financing of real property deemed essential for the conduct
of business, the extension or provision of utilities and any other
appurtenant facilities to be used by any small business, or any
necessary machinery, equipment or stock, working capital or other
capital investment therein, or any combination of the foregoing, which
the fund shall determine will tend to provide gainful employment for the
people of the state and/or increase the tax base of the economy, or
diversify and expand small business, or any combination of the
foregoing.
4. "Housing project" shall mean the construction of any new building,
purchase of an existing building or refinancing of an existing building
and real property deemed essential to such project, in order to
facilitate substantial improvement thereto, designed and intended to
provide housing accommodations for persons and families which cannot
afford safe and sanitary housing accommodations provided by the unaided
efforts of private enterprise, and such facilities as may be incidental
and appurtenant thereto.
5. "Loan guarantee fund" shall mean the fund created in section six of
this act.
6. "Operation and maintenance fund" shall mean the fund created in
section seven of this act.
7. "Lending institution" shall mean the original lender under the loan
agreement of participants therein and its successors and assigns, and
may include but is not limited to, an individual lender, corporation,
insurance company, bank, investment company, executor, trustee or other
fiduciary, pension, profit sharing, and retirement fund.
8. "Payments" shall mean periodic payments called for under the terms
of a loan, and may include, but is not limited to, interest,
installments of principal, taxes and assessments, loan insurance
premiums and hazard insurance premiums.
9. "New York state urban development corporation" shall mean the
corporation created by the New York state urban development corporation
act.
Urban development guarantee fund of New York. 1. There is hereby
created a non-profit corporation which shall be known as the "Urban
Development Guarantee Fund of New York." Except as otherwise provided in
this act, the fund shall have all the powers, privileges and immunities
which are now or may hereafter be conferred on business corporations by
the business corporation law.
2. The business of the fund shall be managed by, and its powers,
functions and duties shall be exercised through a board of directors,
consisting of the directors of the New York state urban development
corporation.
3. The chairman of the fund shall be the chairman of the New York
state urban development corporation. Each director shall be entitled to
reimbursement for his actual and necessary expenses incurred in the
performance of his official duties with the fund.
4. Notwithstanding any inconsistent provisions of law, general,
special or local, no officer or employee of the state or of any civil
division thereof, shall be deemed to have forfeited or shall forfeit his
office or employment by reason of his acceptance of membership on the
fund created by this section; provided, however, a director who holds
such other public office or employment shall receive no additional
compensation or allowance for services rendered pursuant to this act,
but shall be entitled to reimbursement for his actual and necessary
expenses incurred in the performance of such services.
5. The fund and its corporate existence shall continue until
terminated by law, which law shall provide for the disposition of the
properties and assets of the fund and the assumption of its liabilities,
if any. In no event shall such law take effect while debentures,
guarantees or other obligations of the fund are outstanding, unless
adequate provision is made in such law for the liquidation, satisfaction
or securing of such obligations.
6. The powers of the fund shall be exercised by affirmative vote of no
less than five of the directors thereof then in office. The fund may
delegate to one or more of its directors, or its officers, agents and
employees, such powers and duties as it may deem proper.
7. The fund may appoint one or more advisory committees consisting of
not more than seven members each to consider and advise the fund upon
all matters submitted to them by the fund and to recommend to the fund
such changes in the administration of this act and the operations of the
fund as the advisory committee may deem desirable. Members of advisory
committees shall serve without salary for such terms, not to exceed four
years, as the fund may determine. Each member of an advisory committee
shall be entitled to reimbursement for his actual and necessary expenses
incurred in the performance of his duties.
Powers and limitations. 1. In addition to the powers granted by
the business corporation law and except as otherwise provided by this
act, the fund shall have power to:
(a) Guarantee loan repayments to a lending institution that has
provided the funding for a small business project or housing project, as
defined herein, not to exceed eighty percentum of the amount of such
loan, upon such terms and conditions as the fund may prescribe, and for
such purposes, the fund may enter into such agreement or agreements with
lending institutions or other persons as required.
(b) Accept gifts, grants or loans from, and enter into contract or
other transaction with, any federal or state agency, any municipality,
any private organization or any other source.
(c) Enter into agreements with prospective lending institutions and
borrowers for the purpose of planning, designing, constructing,
acquiring, altering and financing projects.
(d) When it becomes desirable for the fund to safeguard itself from
losses, it may acquire, purchase, manage and operate, hold and dispose
of real and personal property, take assignments of rentals and leases
and make and enter into all contracts, leases, agreements and
arrangements necessary or incidental to the performance of its duties.
(e) In order to further the purposes of this act, or to safeguard the
loan guarantee fund, purchase, acquire and take assignments of notes,
mortgages, and other forms of security and evidences of indebtedness,
purchase, acquire, attach, seize, accept or take title to any project by
conveyance, or when an insured loan thereon is in default, foreclose,
sell, lease or rent the subject matter provided for by the loan.
(f) Prescribe standards and criteria by which applications for loan
guarantees for small business projects and housing projects will be
judged, insofar as such standards and criteria are not inconsistent with
the purposes of this act.
(g) Guarantee to any bonding agency authorized to do business in this
state any bond necessary to the activity of the small business or for
the undertaking of a small business project or housing project. Such
guarantee shall not exceed eighty percentum of the face amount of any
loss incurred by the bonding agency.
(h) Issue and sell its debentures, bearing such interest rates and
having such maturities and other terms and provisions as may be
determined by the fund.
(i) To do any and all things necessary or convenient to carry out its
purposes and exercise the powers given and granted under this act, or
under any other law, special, general or local.
2. No part of the net earnings of the fund shall inure to the benefit
of any individual and no employee, director or officer of the fund shall
receive any pecuniary benefit from the fund except reasonable
compensation for services actually rendered to the fund. The fund shall
not carry on propaganda or otherwise attempt to influence legislation.
3. The fund shall not issue shares nor shall any debentures of the
fund be convertible to shares.
Loan guarantee fund. The fund shall establish a loan guarantee
fund. The loan guarantee fund shall be a non-lapsing, revolving fund to
be used for the purpose of carrying out the provisions of this act. To
such loan guarantee fund shall be charged payments required by loan
defaults. To such loan guarantee fund shall be credited all receipts of
the fund, other than receipts allocated for the payment of current
operating expenses, including loan guarantee premiums, gifts, grants or
loans, proceeds of the sale of debentures by the fund, and proceeds from
the sale, disposal, lease or rental of real or personal property which
the fund may receive under the provisions of this act. Monies of the
loan guarantee fund, not needed to meet current obligations of the fund,
shall be deposited to the credit of such loan guarantee fund and may be
invested as the directors of the fund shall determine.
Operation and maintenance fund. The fund shall establish an
operation and maintenance fund, to which shall be charged any and all
operating expenses of the fund, including but not limited to, salaries,
wages, rents, utility charges, office supplies and equipment, and to
which shall be credited all receipts of the fund necessary to meet such
operating expenses.
Guarantee of loans. (a) The fund is authorized to guarantee
repayments of a loan made by a lending institution to provide funding
for small business or housing project as defined herein, not to exceed
eighty per centum of the principal amount of the obligation, upon such
terms and conditions as the fund may prescribe, provided that the
aggregate amount of the unpaid balance of all obligations so guaranteed
and outstanding at any one time shall not exceed one million dollars
during the first fiscal year of operations of the fund, and in any
succeeding fiscal year, five times the average annual balance in the
loan guarantee fund for the preceding fiscal year, and provided further,
however, that the total potential liability of the fund to a lending
institution on behalf of any one borrower shall not exceed one hundred
fifty thousand dollars.
(b) The fund is also authorized to guarantee repayments of loans made
by a lending institution to a purchaser of either a condominium unit in
a multiple dwelling organized under the condominium act, or shares of
stock in a cooperative corporation which owns a multiple dwelling, where
such purchaser intends to reside in such condominium unit or such
cooperatively-owned multiple dwelling. The amount of such guarantee
shall not exceed the lesser of eighty per centum of the purchase price
of the unit or of the shares of stock allocable to the unit, as the case
may be, or $25,000; and the term of the guarantee shall not exceed
twenty-five years. No loan shall be guaranteed if interest thereon
exceeds the legal rate. The aggregate amount of the unpaid balance of
all obligations guaranteed under this subdivision and subdivision (a)
hereof shall not exceed one million dollars during the first fiscal year
of operation hereunder and in any succeeding fiscal year, five times the
average annual balance in the loan guarantee fund for the preceding
fiscal year hereunder.
Conditions for guarantee. In order for a loan to be guaranteed
under the provisions of this act, the loan to be guaranteed must be
executed by a borrower to whom credit is not reasonably available, and
in the case of a borrower undertaking a housing project, provide
financing for the acquisition, construction, reconstruction or
rehabilitation of housing accommodations for persons or families which
cannot afford safe and sanitary housing accommodations provided by the
unaided efforts of private enterprise.
Loan guarantee premium. The fund is authorized but not required
to fix premiums for the guarantee of loan repayments under the
provisions of this act, such premiums to be computed as a percentage,
which shall not exceed one percentum per annum on that portion of the
principal obligation guaranteed hereunder as the fund shall determine on
the basis of all pertinent available data. Such premiums shall be
payable by the borrower in such manner as shall be prescribed by the
fund. The amount of premium is not required to be uniform among the
various loans insured provided, however, that that premium provided for
hereunder shall not be payable more than once on loan guarantees given
under subdivision (b) of section eight of this act.
Expenses of the fund. The fund may in its discretion expend such
monies as may be necessary for any of its expenses, including
administrative, legal, actuarial and other services.
Obligations eligible for investment. Obligations guaranteed by
the fund under this act and participations therein are hereby made legal
investments for all insurance companies, trust companies, banks,
investment companies, savings banks, building and loan associations,
credit unions, savings and loan associations, executors, administrators,
guardians, conservators, trustees and other fiduciaries, pension,
profit-sharing and retirement funds.
Contracts of guarantee; waivers. (a) The fund shall arrange by
contract with the lending institution or the borrower or both to
safeguard the interest of the fund in the event of default by the
borrower, including, at the discretion of the fund, provision for notice
to the fund of default by the borrower, for foreclosure or other
realization upon any security for the loan, for the time and conditions
for payment to the lending institution by the fund of the amount of any
loss to the lending institution guaranteed by the fund, and for the
disposition of the proceeds realized from any security for the loan
guaranteed. When it appears desirable for a temporary period upon
default or threatened default by the borrower, the fund may itself make
payments of installments of principal or interest or both, to the
lending institution, and of taxes and insurance, which payments shall be
repaid, under such conditions as the fund may prescribe, and the fund
may also agree to revised terms of financing when such appear prudent.
(b) Upon request of the lending institution, the fund may at any time,
under such equitable terms and conditions as it may prescribe, consent
to the release of the borrower from his liability under the loan or
consent to the release of parts of any secured property from the lien of
the lending institution.
Interest of directors of the fund. No director of the fund shall
participate in any decision on any contract of guarantee in which he has
any interest, direct or indirect, in the lending institution or borrower
as set forth herein.
Limitation of liability. Neither the directors nor any officer
or employee of the fund, while acting within the scope of his authority,
shall be subject to any personal liability resulting from the activities
of the fund.
Designation and service of process on secretary of state and
registered agent. The directors of the fund shall file with the
secretary of state a certificate setting forth the street address and
the city and county in which the principal office of the fund is located
within ten days of the establishment of such office. The secretary of
state shall note such address upon his records. The provisions of
sections three hundred four, three hundred five and three hundred six of
the business corporation law shall be applicable to the fund.
Inconsistent provisions of other laws superseded. Insofar as the
provisions of this act are inconsistent with the provisions of any other
law, general, special or local, the provisions of this act shall be
controlling.
Construction. This act, being necessary for the welfare of the
State and its inhabitants, shall be liberally construed so as to
effectuate its purposes.
Separability. If any clause, sentence, paragraph, section or
part of this act shall be adjudged by any court of competent
jurisdiction to be invalid, such judgment shall not affect, impair, or
invalidate the remainder thereof, but shall be confined in its operation
to the clause, sentence, paragraph, section or part thereof directly
involved in the controversy in which such judgment shall have been
rendered.
Operative date of the fund. No loan guarantee shall be made by
the fund until there has been credited to the loan guarantee fund the
sum of two hundred thousand dollars.