Banking Interpretations

NYSBL 590(1)

October 17, 2007

Dear Ms. [---]:

Your letter of August 24, 2007 to Examiner Brennan of the Mortgage Banking Division, which concerns [---] was referred to the Legal Division for reply on October 5, 2007.  In your letter, you ask whether [---] requires a mortgage banking license under Article 12-D of the New York Banking Law in order to engage in a certain activity, namely the [---] SCRIE Program ("SCRIE").
As explained in your letter, this program is being offered to certain low income residents of which was previously a "Mitchell-Lama" corporation operating under the New York Private Housing Law but is currently a private cooperative corporation established under the Business Corporation Law. With this transformation, residents of [---] Village Section 3 ("Village") who are senior citizens with low incomes are no longer eligible to participate in the New York City Senior Citizen Rent Increase Exemption Program ("Program"). Under the Program, such senior citizens were not required to pay increases in the carrying charges incidental to their ownership of their apartments as the "Mitchell-Lama" received tax exemptions and other consideration from New York City in lieu of such increases.

To afford relief to those senior citizens who participated in the Program and are currently residing in the village, [---] is proposing to offer SCRIE, under which eligible senior citizens would be able to defer increases in the carrying charges. The eligibility standards for SCRIE will be the same as those for the Program and SCRIE will continue only as long as the Program is offered.  The aggregate amount of the deferred increases will not become due until the unit is sold or transferred, the owner dies or declares bankruptcy or is evicted.  [---] will secure the deferred payments owed to it by placing a lien on the stock and proprietary lease of those participating in SCRIE.

It is indicated in your letter that [---] will charge no interest on the deferred carrying charge increases and that SCRIE is designed solely to benefit the senior citizen tenant stockholders residing at the cooperative residences. This being the case, it appears that [---] will not be "making a mortgage loan", as that term is defined in Section 590(1)(c) of the Banking Law, if it implements SCRIE because SCRIE will not result in any "compensation or gain, either directly or indirectly”, as set forth in that section. Consequently, [---] will not be required to obtain a mortgage banking license prior to implementing SCRIE. I note that my opinion herein relates solely to the applicability of the Banking Law to SCRIE and does not address any other obligations or duties that have under any other applicable law or regulation, including those relating to disclosures to the senior citizen tenant-stockholders with respect to the effect of the deferral.

I trust that this letter is responsive to your inquiry.


Steven Barras
First Assistant Counsel

cc:  William Brennan
       Mortgage Banking Division