In New York state, homeowners pay a tax for the privilege of taking out a mortgage. A mortgage recording tax is incurred when you buy or refinance a home, and in certain areas of New York, you pay additional local taxes on mortgages. You may be able to avoid mortgage recording taxes, however, by using a Consolidation Extension and Modification Agreement, or CEMA.
CEMAs and Mortgages
A CEMA is a document that modifies the terms of a present mortgage and merges it with a new mortgage for the same property. The old and new mortgages become a single mortgage by way of a CEMA. In effect, because the mortgage recording tax was already paid under the previous mortgage, you don't have to pay it again.
CEMAs as Mortgage Assignments
A CEMA is actually a mortgage assignment, transferring the balance on a pre-existing mortgage from the old lender to the new lender. CEMAs are primarily seen in refinances and are relatively rare in purchase loans. Lenders, however, have the final say on whether you can use a CEMA to avoid paying mortgage recording taxes on a refinance or purchase loan.
