CEMA Definition and Process

 

 

NY CEMA Definition

 

The NY CEMA is an acronym for Consolidation Extension & Modification Agreement. It is a tool used by savvy real estate professionals to help their clients save money on New York State mortgage recording tax costs. These savings, especially in the Downstate New York market with the more expensive homes, can total tens of thousands of dollars!

 

When a person obtains a mortgage in New York State, they typically pay a mortgage recording tax on the entire amount of the mortgage. In Upstate New York, and the five boroughs of New York City, that amount ranges from .75 to 2.8% of the entire mortgage amount. This is typically a large percentage of the overall closing costs. Many people in these situations, paying the recording tax on the total amount of the new mortgage, would be hard-pressed to complete the transaction were it not for the NY CEMA.

 

 

How It Works

 

The NY CEMA works by using the existing mortgage amount, the "old money," towards the computation of the total loan amount and the difference between the two, the "new money," is the basis for the mortgage recording tax. Here is an example for New York County and Nassau County (although the CEMA is available in all counties throughout New York State):

 

• Total Loan Amount................$500,000
   
• Existing Mortgage...................$350,000

• New Money...........................$150,000

New York (2.05% minus $30)......$2670 (mortgage tax savings = $6925)

Nassau (1.05% Minus $30)..........$1170 (mortgage tax savings = $2800)

 

 

The value is very real.There are different processes required for each specific transaction, and it varies depending on if the CEMA is a purchase or refinance.

 

 

The Refinance CEMA

 

The Refinance CEMA transaction is a valuable tool for the real estate professional and potentially saves thousands of dollars in closing costs. The Refinance CEMA is the most common way that borrowers save possibly thousands of dollars in NY State mortgage tax costs. Here we can go into more detail.

 

The Overview

For our purposes we will assume that we have a current lender/mortgage holder that participates in the NY CEMA transactions. This is a requirement to competing a NY Refinance CEMA transaction but you should be aware that not all lenders participate in this area. Some lenders simply are not interested in borrowers saving money on NY State mortgage recording tax.

 

 

The process itself can be best explained by examining the documents involved in a NY Refinance CEMA transaction. Here is a checklist for a NY Refinance CEMA with a step by step procedure(to be used only by attorneys):

NY Refinance CEMA Procedure

 

1. The existing Mortgage(s) must either be with the same lender or a new lender. If a new lender then this will require a Mortgage Assignment from the current lender to the new lender.

 

 

2. You must confirm the unpaid principal balance on the existing Mortgage(s). This amount, plus the “new money” or “gap” amount, is the total consolidated amount.

 

3. The Assigning Lender must also provide the Original Note and Mortgage along with an Allonge to the Note making the same payable to the new Lender. Sometimes it is acceptable to provide a Lost Note Affidavit.

 

4. The consolidating lender’s attorney and/or the New Lender prepares The Consolidation Extension & Modification Agreement with the following steps: 

 

A: List of all Notes & Mortgages being consolidated, extended and modified.

B: Property Description

C:Copy of Note with specific language (This Note amends and restates in their entirety, and is given in substitution for, the Notes described in Exhibit A of the New York Consolidation, Extension, and Modification Agreement dated the same date as this Note)

D: Copy of Consolidated Note with applicable Riders

E: Original Gap ("new money") Note

F: Original Gap ("new money") Mortgage

G: 255 Affidavite

H:Title Policy (Consolidated Mortgage, as modified, remains a first lien on the property)