§ 59-c. Insured housing initiatives fund. 1. The agency shall create and establish a special fund to be known as the insured housing initiatives fund and shall pay into such fund any moneys which may be made available to the agency for the purposes of such fund from any source, including, but not limited to, moneys appropriated by and made available pursuant to appropriation by the state and any income or interest earned by, or increment to, the fund due to the investment thereof or moneys payable to the agency under any contract entered into pursuant to subdivision two of this section. Subject to the provisions of any contract with bondholders and noteholders and any contract authorized pursuant to this section for the provision of insurance, letters of credit or other financial mechanisms, the moneys held in or credited to the insured housing initiatives fund established under this subdivision, in the discretion of the agency, shall be used by the agency in accordance with subdivision two of this section to enable it to reduce the debt service that would otherwise be payable by the agency on its bonds, notes and other obligations issued to make loans pursuant to subdivision twenty-nine-a of section forty-four of this article, and thereby to reduce the obligations of the borrower to the agency. The reduction in debt service as a result of any contract entered into pursuant to subdivision two of this section shall result solely in the reduction of rents payable by low income individuals or families residing in those units in the housing development assisted by the fund that are required to be occupied by such individuals or families for interest on obligations issued to finance such housing development to be exempt from taxation pursuant to section 103(b)(4) of the internal revenue code of 1954, as amended. Provided, however, to the extent that such rents for such units are affordable to persons or families whose income is not in excess of sixty-five percent of median income for the area, as defined by the agency, then any remaining savings or benefits shall be applied to the further reduction of such rents for such units, and/or the reduction of rents payable by other low income individuals or families residing in the housing development assisted by such fund and/or the increase in the occupancy of low income individuals or families residing in such housing development in excess of that required pursuant to section 103(b)(4) of the internal revenue code of 1954, as amended.

2. The agency may enter into contracts for the provision of insurance, letters of credit or other financial mechanisms designed to reduce such debt service on bonds, notes and other obligations of the agency in accordance with this section, so long as such obligations receive an investment grade rating from a recognized rating agency. The moneys held in or credited to the fund shall not be used to pay the principal of or interest on such obligations of the agency, the principal of or interest on the obligations of the borrower to the agency or any fees of the agency.

3. For the purposes of this section, "low income individuals or families" shall mean persons or families with incomes of no more than eighty percent of the median income for the area, as defined by the agency.

4. The agency shall account separately for all moneys received by the fund.