Home For Lenders
Choosing CLS as your Title/Settlement Partner provides you and your borrowers with superior professional service and the confidence to know the closing process will be a pleasant experience for all.
CLS values our Vendor relationships and is always interested in creating solid business partnerships that meet the needs of our clients. In today's changing regulatory environment it is important for you to work with a company that takes compliance seriously.
Consolidation, Extension and Modification Agreement. The agreement used in conjunction with an assignment of the existing mortgage in order to save on the cost of mortgage tax paid by the borrower.
Or new money mortgage. The mortgage which recites the amount of the new money, only, advanced at the time of closing, over and above the outstanding principal balance of the existing mortgage loan.
Or new money note. The note with an amount which corresponds to the Gap Mortgage.
The mortgage which recites the total amount of the loan as consolidated, i.e. the outstanding principal balance of the existing mortgage loan and any new money advanced at the time of closing.
The note with an amount which corresponds to the Consolidated Mortgage.
The purpose of a CEMA is to avoid paying full New York State mortgage tax on a refinance transaction. In virtually every other state, a refinance transaction involves the payoff and discharge of the existing mortgage loan and the recording of an entirely new mortgage. In NY this would result in the payment of mortgage tax based on the face value of the new mortgage. With a CEMA transaction, the existing mortgage is not discharged. Rather, the existing lender assigns its mortgage to the new lender. The new lender will then have the borrower execute a new mortgage only for the new money loaned, over and above the existing principal balance of the existing loan. Mortgage tax is then paid only on that new money. Of course, if the existing mortgage is currently held by the "new lender", no assignment is necessary.
Two of the most important caveats in connection with a CEMA are as follows:
First, a CEMA is not automatic. An existing lender may not agree to assign their loans and there is no requirement in NY that they must do so.
Second, the CEMA process can take a considerable amount of additional time. Currently 45 to 90 days is the norm. The new lender needs to understand this so as not to create a rate lock situation that will expire before the CEMA process can be completed. In addition to the above there are additional up front costs. Existing lenders usually require an up front fee of $300 or more to process the request. Furthermore, up front fees to the attorney for the existing lender may be required for his or her services in holding the existing loan documents in escrow pending closing.
One final note - we normally tell our customers NOT to prepare their Good Faith Estimates based on doing the refinance transaction as a CEMA. If it turns out that the CEMA is not possible or is not cost effective this could result in an under disclosure violation and a credit to the borrower by the lender. The disclosure should be made with full mortgage tax being paid
- CEMA's will take considerably longer to close, as existing lender must agree to assign and transfer their loan, and transfer of original documents must be coordinated.
- CLS should be informed of the request to close as a CEMA at time of order.
- A cost savings analysis should be done up front as there are additional costs in closing a loan as a CEMA.
- Additional costs of closing a loan as a CEMA include:
- Fees by existing lenders to assign and transfer their loan
- Attorney fees for existing lender for transfer of original documents, i.e. note, mortgage, etc.
- Additional recording fees
- Settlement Agent's fee to prepare CEMA and related documents
- Not all lenders will assign and transfer their mortgage loans.