Real Estate: The CEMA And How It Can Potentially Save You Money!

Everything you always wanted to know about the CEMA (Consolidation Extension and Modification Agreement) but may not have known to ask!

While commonly used in commercial real estate transactions, the CEMA or Consolidation Extension and Modification Agreement can also be used by residential real estate buyers and mortgage refinancers to save money on their closing costs!

And yet many may not know that they have the option.

From Warburg Realty, ‘CEMA: A Strategy to Save Money at Closing

Purchasing a new home can be an expensive venture—and it involves quite a bit more than just the price of a property. In order to close on a property, buyers always face a bevy of settlement costs, which include everything from loan origination fees to appraisal charges to credit report costs. According to the Federal Reserve as a general rule of thumb, buyers spend 3% of their purchase price at closing in order to get the keys to their new home. However, in certain high-tax areas of the country such as New York, closing costs can range between 5% and 6% of the home price. Per a national survey conducted and published each year by Bankrate purports that closing costs continue to rise because lenders are required to comply with the ever-changing mortgage regulations. Lenders are spending more to: 1) properly document and analyze borrower’s loan application to stricter lending requirements, 2) devise and update their proprietary systems; and 3) increase and train staff to comply with the new regulatory rules set by U.S. and Global Regulators.

For buyers in New York, however, closing costs can possibly be lessened. A Consolidation Extension and Modification Agreement (CEMA) loan can save money for buyers and refinancers on condos, houses and townhomes. CEMA is not an option for purchasing co-ops because they are not considered real property—so a Mortgage recording tax does not apply. Yet while CEMA is common in the commercial real estate community, it’s still largely unknown by many in residential real estate.

CEMA, which most major lenders offer commonly for refinances and is a specialty concept for purchases, allows buyers the ability to assign the old mortgage and consolidate and amend it with a new mortgage for refinances and in some cases purchases. Using this strategy, buyers pay the tax on the difference between the seller’s current balance of the outstanding mortgage (old mortgage) and the purchaser’s new mortgage. Comparatively, buyers who don’t use a CEMA strategy pay mortgage recording tax on the entire mortgage amount on their home.

Implementing CEMA can also help sellers. According to the New York State Law on “Continuing Lien Exclusion” (implemented on Aug. 28, 1997), “the outstanding amount of a lien existing prior to a transfer may be excluded from consideration (legal value in connection with contracts promised to another) when the property being transferred is a one-to-three family house, a residential cooperative or condominium unit or as an economic interest in such property.” In other words, the seller benefits by saving a portion of their New York State transfer tax as well. Rather than the Seller paying transfer tax on the full sale price the transfer tax is the sale price less the amount of the mortgage obtained by Buyer. The New York State transfer tax rate is currently 0.4% of the sales price of a home.

Read the rest of the article including purchase and refinance examples, courtesy of Karen Kostiw, at the Warburg Realty Blog here.


Michael Haltman, President of Hallmark Abstract Service, New York.

HAS is a provider of title insurance in New York State for residential and commercial real estate transactions.

And, for anyone either buying a property or refinancing, remember that although your attorney will likely recommend a title insurance provider you always have the right to choose your own (click here to learn more)!

If you have any questions you can reach Michael by email at

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