What is a CEMA and How Does it Save Money in New York?

“CEMA” stands for Consolidation, Extension and Modification Agreement, and is used to save mortgage tax in certain situations.

Sellers sometimes use this process and procedure to refinance real estate located in New York State because, when recording a New York Consolidation, Extension and Modification Agreement, they pay only the mortgage tax on the difference of the new money and old. The idea behind a CEMA is to renew the terms of an existing mortgage by re-financing an existing note and mortgage. The CEMA is the actual legal document which combines into one set of rights and obligations all the promises and agreements stated in existing Notes and Mortgages secured by the property being re-financed.

If the new Consolidated Note and Mortgage includes additional monies (or funds), the Borrower pays only the Mortgage Tax on such “new funds.” In counties such as Dutchess, Rockland, Westchester, Ulster this process can save thousands of dollars because the mortgage tax is paid (over one percent) on the difference between the old money and the new funds.

If you are refinancing a Mortgage secured by property located in New York State for delivery to Freddie Mac, your attorney or mortgage professional should use the most current version of the New York Consolidation, Extension and Modification Agreement Single-Family Fannie Mae/Freddie Mac Uniform Instrument (Form 3172).

The NY CEMA is utilized for refinances in lieu of the traditional cancellation (satisfaction) of the old Mortgage Note and release of the lien. The NYCEMA enables Borrowers with Mortgages secured by property located in New York to reduce the amount of the Mortgage recording tax paid in connection with the refinance. Tax on the outstanding Mortgage balance has already been paid, so the Mortgage tax is waived on that amount
Sometimes the process takes a long time because the original lender must locate the original note and mortgage and deliver to the Refinancing agent.

The bottom line– look into the process because it may save you closing costs in a New York State refinance.