(a) In cases where a mortgage has been recorded without payment of the appropriate taxes described in Part 642 of this Title, and to the extent the mortgage covers real property located in the City of New York, interest shall be imposed and computed upon the unpaid balance of taxes due. The rate of interest to be imposed on the taxes remaining unpaid shall be the rate of interest prescribed pursuant to section 1096(e) of article 27 of the Tax Law for underpayments of tax. Such interest shall be compounded daily.

(b) In addition to the interest described in subdivision (a) of this section, in cases where it could not be determined from the face of an instrument that mortgage recording taxes were due, or where an advance has been made on a trust mortgage or a re-advance has been made on a mortgage where the original indebtedness has been paid in whole or in part and taxes remain unpaid, and to the extent the mortgage covers real property located in the City of New York, there shall be imposed a penalty at the rate of 10 percent of the amount of taxes due for the first month of delay in payment of the taxes plus two percent of the amount of taxes due for each month of delay thereafter, up to a maximum of 25 percent.

(c) In cases where a mortgage of real property subject to the taxes described in Part 642 of this Title has been recorded or is hereafter recorded in good faith, and the recording officer has held such mortgage nontaxable or taxable at one amount, and it is later determined by the commissioner that it is taxable or taxable at a greater amount, the commissioner may cancel the penalties described in subdivision (b) of this section but not the interest.