A Consolidation, Modification, and Extension Agreement (often called a CEMA) occurs when the current lender who holds the property currently assigns the mortgage to your lender. Your lender then modifies its terms to reflect that you assume the new interest rate and maturity date and the new loan. Although this is tricky and requires the assistance of a seasoned attorney, it can result in many thousands of dollars in savings for you. The savings are attributed to not recording a new mortgage for the current outstanding principal balance and, therefore, not paying a mortgage tax on that amount.

However, there are a few requirements for CEMA to be a possibility –

  • There must be an outstanding mortgage on the property
  • The mortgage must be large enough to make a CEMA worthwhile
  • The seller must agree to cooperate
  • The seller’s bank and your bank must also cooperate

It would be best if you discussed a CEMA with the seller as early as possible. Ideally, you would include it with your offer, as that avoids a second negotiation round. While a CEMA does reduce the seller’s New York State transfer taxes, that is usually not enough, and they will often want to split the mortgage recording tax savings with you. This discussion can be avoided if it’s presented with the offer.

You will still have to pay the mortgage tax on the amount you are getting above the outstanding principal balance of the seller’s mortgage. Still, a CEMA can result in a significant saving for you when purchasing New York property.

Call Federal Standard Abstract today at 718.888.7778  to open an order. We guarantee smooth sailing and a confident closing every time.