Get Up to Speed on CEMA: What You Need to Know

In New York, a CEMA loan stands for “Consolidation Extension and Modification Agreement”.  People who opt to use this are generally trying to avoid paying some or all of the mortgage recording tax within the state, and this applies most often to those going through the refinancing process.  If the mortgage tax savings outweigh the fees associated with using a CEMA, a borrower should considering taking advantage of this opportunity.

Each case is unique, but a borrower may be eligible to save based on three factors:

  • The amount the bank may charge for providing an assignment (which is required in the New York CEMA process).  Bear in mind that some banks will not do the assignment, making the borrower ineligible for a CEMA;
  • The unpaid principal balance on the existing loan;
  • The mortgage tax rate, set by each county within the state

When the mortgage is recorded, the mortgage tax is assessed.  In a typical refinance transaction, the previous loan is paid in full.  If you are able to pay off and satisfy an existing loan you will be responsible for the mortgage tax on the new mortgage, unless your bank is willing to assign the mortgage to the new lender.  This is an essential part of the New York CEMA process in order to reap the benefits of this kind of transaction.

Extra time may be required in order to process this loan, because an existing lender has to work with an attorney in person to collect the check and to drop off the original mortgage, the original note, and the original assignment.  If there are savings to be had for you, this kind of transaction can be valuable.  Contact a real estate attorney if you have additional questions on this specific type of real estate transaction.