SIBPC Purchase CEMA in New YorkWhat is a CEMA (Consolidation, Extension and Modification Agreement), and how does it affect your New York City Real Estate Transaction?

A Consolidation, Extension and Modification Agreement (CEMA) allows New York State homeowners to save thousands of dollars on New York State Mortgage Tax when refinancing.

When a mortgage is recorded for a New York City real estate transaction, the borrower must pay Mortgage Tax. A CEMA allows a new lender to utilize the outstanding principal balance of the current lender’s existing mortgage and offset it against the new loan. The borrower then only pays mortgage tax on the excess.

The CEMA is exceptionally beneficial in the five boroughs of New York City, where the Mortgage Tax rate is quite high. It is important to remember that a CEMA should only be used when the savings exceed the costs associated with it. Seth I. Ben-Ezra, P.C. and team has executed (fill in the right language here) more than a thousand CEMAs in his 20 year career in Real Estate Legal Services, and can help you make the right choices in that process.

As an example of the many intricacies of the CEMA, it is essential to remember that the current lender is under no legal obligation to Assign the existing mortgage to the new lender. They only do so if they choose to do so.

If you think a CEMA might be the right choice for you, call our office today and talk to one of our friendly staff. You can also fill out the form below, and we’ll follow up with you usually the same day!

Want to Read More About a Purchase CEMA? Read On!

Consolidation, Extension and Modification Agreements, Step-by-Step

The state of New York charges a mortgage recording tax whenever a new mortgage is recorded. To reduce the mortgage tax burden, New York State Law allows an existing loan (or loans) to be assigned to a new lender by means of a consolidation, extension and modification agreement (CEMA).

How a CEMA Works

Using this method, the borrower pays the recording tax only on any “New Money”. That is, they pay mortgage tax on any money borrowed that exceeds the then current principal balance on their existing loan. In order to accomplish this, instead of the existing liens being paid off, they are assigned/transferred to the new lender who consolidates, extends and modifies the term and structure of the existing loan(s) into new documents.

The Locking and Closing Plan for most CEMAs can take at least 60 days to process. The bank/lender or investor that holds the current loan needs to locate the original Note and Mortgage (together with any prior CEM docs) as well as any and all intervening assignments, endorsements and allonges.

What Costs can be Expected for New York City Real Estate Transactions? 

The cost to the existing lender has trended upward over the last decade or so.

Most lenders require that their collateral documents be sent to a third party before being delivered to the lender’s attorney when funds are exchanged. The existing lender (together with their attorney of choice) will generally collect a fee in the $1,100 range.

In addition, in the event there are missing documents, certified true copies may need to be obtained at a cost of $150 or more per document (depending on the number of pages, the county in which the docs are recorded and the title company obtaining the documents).

There are also additional attorney’s fees and recording charges for the new loan.

Generally, the additional legal fee is $400 – $550.00 and the additional recording should be in the range of $400 – $600 (this is because a CEMA, assignment and section 255 affidavit will be recorded in place of the typical satisfaction)

It is because of the additional expense that a CEMA analysis should always be run to ensure that the mortgage tax savings outweigh the time and financial costs associated with a CEM.

What Savings can you Expect from a CEMA in NYC? 

Mortgage tax savings are based on the outstanding principal balance of the first mortgage currently against the property.

In the event the borrower is paying down the current loan, there will be NO mortgage tax due. To the extent that the new loan exceeds the current PRINCIPAL balance of the existing loan, mortgage tax will be collected.

For instance, on a rate and term refinance in New York County with a principal balance of $405,000 and a $417,000 new loan, mortgage tax will be paid on the $12,000 in “New Money” borrowed even though there may be no cash out.

CEMA Underwriting Guidelines

CEMA loans are treated the same as any other refinance and must comply with the applicable loan program guidelines.

Closing and Closing Attorneys: Most lenders maintain a list of approved closing attorneys for their CEMA transactions.


Most second lien holders do not allow their liens to be assigned into a CEMA transaction.

This is true for several reasons, not the least of which is that the second lender often paid the mortgage tax when the loan was closed. Therefore, if the second lien is not being subordinated, it must be paid off, with its balance included in the ‘new money’ Gap loan.

Unless you understand every term used in this brief overview of a CEMA, it’s advisable that you obtain the services of a qualified profession like Seth I. Ben-Ezra, P.C. and team to walk you through it.

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