Understanding CEMA
Transactions

What Is a CEMA?

A CEMA -- short for Consolidation, Extension, and Modification Agreement -- is a legal mechanism available to New York borrowers that allows them to avoid paying full mortgage recording tax when refinancing their home. Instead of satisfying the old mortgage and recording an entirely new one (which triggers the full tax), a CEMA modifies and extends the existing mortgage, and the borrower pays tax only on the new money borrowed.

Given that New York's mortgage recording tax ranges from 1.8% to 2.175% depending on the county and loan amount, the savings from a CEMA can be substantial -- often tens of thousands of dollars.

How the Savings Work

Here is a straightforward example. Suppose you have an existing mortgage of $400,000 and you want to refinance to a new loan of $450,000.

• Without CEMA: You pay mortgage recording tax on the full $450,000 new loan. At a 1.925% rate (common in many NY counties), that is $8,662.50.
• With CEMA: You pay mortgage recording tax only on the $50,000 difference (the "new money"). At 1.925%, that is $962.50.
• Your savings: $7,700.

For borrowers with larger mortgages, the savings can exceed $15,000 or more. This is why CEMAs are considered essential for any NY refinance where the existing lender and new lender agree to participate.

Who Is Eligible for a CEMA?

CEMAs are available for residential and commercial refinances in New York State. To qualify, you need:

• An existing recorded mortgage on the property (you must already have a loan to consolidate).
• Cooperation from the existing lender -- the current lender (or their servicer) must agree to assign the existing mortgage to the new lender. This is the most common hurdle.
• A willing new lender -- not all lenders offer CEMA refinances, though most major banks and mortgage companies do.
• An experienced title company -- CEMAs require specialized title work, including coordination between old and new lenders, assignment preparation, and precise recording.

Why Not Every Refinance Uses a CEMA

Despite the clear financial advantage, some refinances still proceed without a CEMA. Common reasons include:

• The existing lender refuses to assign. Some lenders (particularly smaller banks or those in bankruptcy) decline to participate in the CEMA process.
• The borrower is paying off the mortgage entirely (no new loan) -- there is nothing to consolidate.
• Time pressure. CEMAs add 2-4 weeks to the closing timeline because of the additional lender coordination. Some borrowers opt to skip the CEMA to close faster, though this is rarely advisable given the savings involved.
• The existing loan is very small. If the existing mortgage balance is low relative to the new loan, the savings may not justify the additional closing costs (though they usually do).

The CEMA Process Step by Step

1. Application: You apply for a refinance with a new lender and indicate you want a CEMA.
2. Title search: The title company (like Simplicity Title) conducts a title search and confirms the existing mortgage details.
3. Assignment request: The title company contacts your existing lender's CEMA department to request an assignment of the existing mortgage.
4. Lender coordination: The old and new lender negotiate the terms of the assignment. This is where delays most often occur.
5. Document preparation: The CEMA agreement, assignment, and consolidation documents are prepared.
6. Closing: You sign the new loan documents and the CEMA agreement at closing.
7. Recording: The assignment, CEMA, and new mortgage note are recorded with the county clerk. Mortgage recording tax is paid only on the new money.

Simplicity Title's CEMA Expertise

CEMA transactions require a title company with deep NY experience and strong lender relationships. At Simplicity Title, we have 20+ years of New York title experience and handle CEMA closings across all 62 New York counties. Our team manages the lender coordination, document preparation, and recording -- so you capture the maximum tax savings without the complexity.

For more on our New York services, visit our NY title insurance and settlement page.