N.Y. Comp. Codes R. & Regs. tit. 9, § 153.4 – Guidelines approved by director of Division of the Budget.

(a) These guidelines apply to all mortgage modification agreements whereby a housing company seeks to qualify for moneys from the Project Repair Fund.
(b) The existence of a 20-percent or $10 per room per month difference between current rent and total economic rent at an HFA-financed housing project will not automatically qualify that project for a mortgage modification agreement. Rather, the existence of that situation shall be considered a necessary but not a sufficient test or criterion that must be met if a mortgage modification agreement is to be valid. Mortgage modification agreements must also satisfy or meet the other guidelines for mortgage modifications approved by the director of the Division of the Budget as set forth in these guidelines.
(c) Applicants for mortgage modifications shall demonstrate, in a manner satisfactory to the agency, that all reasonable efforts to manage a project economically and efficiently, to minimize project operating costs, and to secure available Federal subsidies or grants that may be used to increase project income or to effect energy conservation improvements, have been taken. In making this determination, the agency shall consider the findings and recommendations of the commissioner made pursuant to paragraph (i)(2) of this section. Applications for rent or carrying charge increases should not be delayed, nor should project expenditures be allowed to increase without sufficient cause, so that a project may eventually qualify for a mortgage modification.
(d) Mortgage modification agreements may be made only in those cases when a housing project is unable or will be unable, as determined by the commissioner of the Division of Housing and Community Renewal (the commissioner) and the executive director of the Housing Finance Agency, to fully satisfy, on a timely basis, its obligations for debt service, water and sewer or property tax payments for an extended period.
(e) The inability of a housing project to make payments into reserve accounts or to generate a return on owner's equity because of a shortfall in total project revenues will not be sufficient to qualify that project for a mortgage modification. However, in order to be eligible for a mortgage modification, projects will not be required to fully expend or disburse the balance of their escrow or reserve funds.
(f) The commissioner shall certify that:
1. (1) the project has an approved operating budget for the current fiscal year as required by section 32-a of the Private Housing Finance Law;
2. (2) no expenditures have been made by the project in the current fiscal year except as authorized by that budget, or as authorized by the commissioner or his designated representative; and
3. (3) he has reviewed the project's operating budget for the current fiscal year in light of the need for a mortgage modification and in recognition that the project may fail to make timely and full debt service payments, and has therefore approved only those expenditures necessary to protect the health and safety of tenants and to maintain the project in a habitable condition.
(g) The necessity for setting carrying charges or rents below the level of current economic rent shall be demonstrated, together with market surveys and analyses where appropriate. Only in extraordinary circumstances shall the carrying charges or rents be below the level of current economic rent for the full 75 months permitted by section 60(3)(b) of the Private Housing Finance Law.
(h) Only one mortgage modification agreement may be made for any housing project.
(i) There shall be:
1. (1) an analysis that explains why a mortgage modification, rather than a foreclosure of the project's mortgage lien, is preferred and is in the best interests of the State;
2. (2) an evaluation, to be prepared by the commissioner of the Division of Housing and Community Renewal, of the quality of the management of the housing project. That evaluation shall identify existing and potential management problems at the project, particularly those management practices which have a negative effect upon occupancy rates, the collection of rents, building maintenance, operating costs, and the efficient operation of the project in general. The commissioner shall also recommend appropriate remedies for the problems identified in his evaluation of the management of the project and shall review and approve a management improvement plan for the project;
3. (3) if the housing project has applied for project repair funds as well as for a mortgage modification, in addition to the other evaluations or analyses required as specified in these guidelines, the mortgage modification application shall include a copy of the certification prepared by an independent consultant engaged by HFA as required by paragraph (a) of subdivision 3 of section 60 of the Private Housing Finance Law;
4. (4) an estimated operating budget for the project to be prepared by the commissioner of the Division of Housing and Community Renewal, for the duration of the mortgage modification period that shows all anticipated project revenues and expenditures and the average annual carrying charges, rental rates or other fees necessary to produce those revenues. The estimated budget shall also show and explain the economic assumptions, inflation rates, vacancy rates and other factors affecting project costs and revenues which were used in order to develop the estimated operating budget;
5. (5) an estimate prepared by the Housing Finance Agency of the probable impact of the mortgage modification agreement upon the relevant debt service fund of the agency, and of the amounts which the State may be asked to appropriate to that fund under the moral obligation provisions of the HFA bond covenants;
6. (6) a schedule showing the increases in rents, carrying charges, equity contributions, garage rents, commercial space rentals or other charges imposed by the mortgagor which will be implemented during the period of the mortgage modification;
7. (7) a statement of all debt service, water and sewer, and property tax arrearages accumulated by the project before the beginning of the mortgage modification period, as well as an estimate of the arrearages that will accumulate during the period of the mortgage modification, and a schedule for the repayment of all such arrearages that is in accordance with Private Housing Finance Law, section 60(3)(b).
  (j)
8. (1) The Executive Director of the Housing Finance Agency and the Commissioner of the Division of Housing and Community Renewal shall notify the Director of the Division of the Budget, as soon as is practical under the circumstances, that a housing company has applied for or expressed an interest in obtaining:
  1. (i) project repair funds; or
  2. (ii) a mortgage modification agreement necessary to qualify that project for the receipt of project repair funds.
9. (2) The director of the Division of the Budget and his staff shall be kept fully informed of the progress of negotiations among HFA, the housing project and DHCR concerning proposed grants for the correction of construction defects from the Housing Project Repair Fund and any mortgage modification necessary to qualify a project to receive those monies.
10. (3) The director of the Division of the Budget and his staff shall have access to and shall be supplied with draft copies of:
  1. (i) all proposed mortgage modification agreements; and
  2. (ii) consultant's reports developed pursuant to paragraph (a) of subdivision 3 of section 60 of the Private Housing Finance Law; as such are exchanged among the parties to the negotiations, so that the impact of those agreements or reports upon the fiscal resources of the State may be evaluated.
11. (4) The director of the Division of the Budget and his staff shall have the opportunity to comment upon and make recommendations for changes to those agreements and reports.
(k) Before any mortgage modification agreement to which these guidelines are applicable is recorded, the director of the Division of the Budget shall have certified that such agreement complies with these guidelines, or that any noncompliance has been waived pursuant to subdivision (n) of this section.
(l) When a housing company has requested monies from the Project Repair Fund, and shall have demonstrated to HFA the reasonable likelihood of the existence of construction defects, HFA shall engage a consultant to assess the physical condition of the housing project involved. That assessment shall identify any existing physical defects at the project, determine the extent to which those defects constitute construction defects, identify potentially necessary repairs and replacement, provide an opinion as to the adequacy of the project replacement reserves and otherwise conform to section 60(3)(a) of the Private Housing Finance Law.
(m) HFA shall recommend to the director of the Division of the Budget an allocation of appropriated and available monies of the Project Repair Fund among qualifying housing companies in accordance with the immediacy and necessity of repairs and availability of funds.
(n) The director of the Division of the Budget reserves the right to modify, amend or add to the mortgage modification guidelines set forth above, or to waive any guideline in order to protect the interests of the State.