2010 New York Code
RPP - Real Property
Article 4 - (119 - 123) USES AND TRUSTS
121 - Reorganization of property covered by trust mortgage.

§  121.  Reorganization  of  property covered by trust mortgage.  Such
  banking corporation, under the direction of the court in the foreclosure
  action may, and if directed by the court shall, purchase or cause to  be
  purchased  said  real  property,  pursuant to a reorganization plan, and
  cause to be  formed  a  domestic  business  corporation,  or  a  foreign
  corporation  providing  such  foreign  corporation  is  authorized to do
  business within this state,  or  utilize  any  other  such  corporation,
  providing  the  corporation so formed or utilized shall have provided in
  its certificate of incorporation the restriction set  forth  in  section
  one hundred eleven of decedent estate law, and shall thereupon grant and
  release  said  property to such new corporation and its assigns forever,
  or by assignment of its bid to such new corporation, or otherwise, cause
  the referee's deed in foreclosure to be executed and delivered  directly
  to  such  new corporation granting and releasing such property to it and
  its assigns forever,  in  exchange  for  the  stocks,  bonds  and  other
  securities of such new corporation except such of said securities as may
  be  reserved  for  the  adjustment  of  liens  and  claims  against said
  property, or for other purposes as specified in the plan, including  any
  provision  made  in a plan approved by the court and thereafter becoming
  effective  as  provided  in  section  one  hundred  twenty-two  for  any
  interest,  junior  or  subordinate to the mortgage foreclosed; provided,
  however, that such new corporation shall be authorized to raise money by
  mortgage, pledge, borrowing, sale of  securities  or  otherwise  to  the
  extent  which  may  be  set  forth  in  the  plan of reorganization. The
  trustee, upon receiving such securities and any cash available from  the
  new  corporation,  shall  distribute  the  same  and  any other funds or
  property constituting part of the trust estate,  ratably  amongst  those
  parties  interested  in  such  mortgage, deed of trust or indenture less
  such trustee's proper expenses and charges in connection therewith;  and
  thereupon  the  trustee  upon the filing and approval of its accounts in
  the foreclosure action and upon assigning to such  new  corporation  any
  deficiency  judgment  and  any guarantees and insurance policies held by
  the trustee and any claim for waste or otherwise in connection with  the
  mortgage  estate,  shall  be  discharged  of  any  further obligation or
  liability under such mortgage or indenture or otherwise. Nothing  herein
  contained  shall  affect or impair the liability of any guarantor or any
  right or remedy existing in  favor  of  any  holders  of  bonds,  notes,
  certificates  or other securities which are secured by or participate in
  such mortgages, deeds of trust or indentures.