What a CEMA Is in New York, What It Saves and How Long It Takes

A CEMA (consolidation, extension and modification agreement) lets a New York borrower avoid paying mortgage recording tax twice on the same debt. Instead of paying off the old mortgage, the existing lender assigns it to the new lender, the new lender adds a “gap” mortgage for any new money, and the two are combined into one loan. Mortgage recording tax is then due only on the new money. On a typical New York City refinance, that can cut the tax by thousands of dollars. The trade-off is extra paperwork, lender and attorney fees, and time, because the old lender has to cooperate.

The rule is statewide. This guide uses New York City and Westchester County examples. For current rates, see Mortgage recording tax in NYC and Westchester.

Why a CEMA saves tax

New York taxes a mortgage when it is recorded, based on the principal it secures. A normal refinance pays off the old loan, the old mortgage is satisfied, and the new mortgage is taxed on its full amount, even though tax was already paid on the old balance years earlier.

Tax Law § 255 exempts a supplemental mortgage or instrument that secures debt already taxed under a recorded mortgage. If the supplemental instrument also secures new or further debt, tax is due on that new amount only. A CEMA is built to fit this exemption: the old mortgage stays alive, is assigned to the new lender, and the consolidation agreement supplements it.

People often call the mortgage recording tax a “transfer tax.” It is not. Transfer tax attaches to a deed when property is sold. Mortgage recording tax attaches to a mortgage, so it arises on refinances as well as purchases, and the borrower pays most of it. You will also see CEMA written as “MECA” in forums and emails. It is the same thing; the standard term is CEMA.

The documents in a CEMA

A refinance CEMA usually involves these instruments:

Document	What it does
Assignment of mortgage	Old lender transfers existing note and mortgage to new lender
Gap note and gap mortgage	Secure the new money only
Consolidated note	Replaces all notes with one obligation
CEMA	Combines the mortgages into one lien and sets new terms
Section 255 affidavit	Sworn statement supporting the tax exemption

Assignment. The existing lender, not the borrower, signs the assignment. Under Real Property Law § 275(3), an assignment of a mortgage that continues to secure a debt must include a sworn statement that the assignee is not acting as the borrower’s nominee and that the mortgage continues to secure a bona fide obligation. The old lender also has to deliver the original note, properly endorsed, so the new lender can hold it.

Gap mortgage. Only the gap mortgage is taxed. In NYC and Westchester, the borrower’s $30 deduction for a one- or two-family home applies to the gap mortgage when it is recorded as a separate mortgage, but not to the consolidated mortgage itself (NYS Tax Department bulletin TB-MR-5, Examples 1 and 2).

CEMA and consolidated note. For loans sold to Fannie Mae or Freddie Mac, the consolidation is documented on the uniform Form 3172, New York Consolidation, Extension and Modification Agreement. Its exhibits list every prior note, mortgage, assignment and consolidation being combined. Fannie Mae’s Selling Guide B8-2-02 requires this form and states that New York law permits CEMAs on refinances “and sometimes purchase money mortgages.”

Section 255 affidavit. The exemption is claimed at recording by filing a sworn statement of the facts with the recording officer (Tax Law § 255(2)(a)). In practice the affidavit lists the prior mortgages, their recording information and the tax paid, the unpaid principal being consolidated, and the new money. If the exemption is missed at recording, § 255(2)(b) allows a refund claim to the Tax Department with a sworn statement.

After closing, the old mortgages do not get their own satisfactions. A single satisfaction of the consolidated mortgage later discharges the whole chain. That is why a CEMA’d property can show several older mortgages in ACRIS with no satisfaction of their own; see How to read ACRIS for title.

Worked example: NYC refinance

Hypothetical: a one-family house in Queens. Existing unpaid balance $500,000. New loan $600,000 from a bank. Rates from Form MT-15 as set out in the mortgage recording tax guide: 2.175% gross for a one- to three-family house with a loan of $500,000 or more, of which the lender pays 0.25%.

	Without CEMA	With CEMA
Taxed amount	$600,000	$100,000
Gross tax (2.175%)	$13,050	$2,175
Lender pays (0.25%)	$1,500	$250
Borrower pays (1.925%, less $30)	$11,520	$1,895

The borrower’s tax drops by $9,625 and the lender’s by $1,250.

One point to confirm on each deal: NYC rate tiers turn on whether the principal is under or over $500,000 (Tax Law § 253-a(1)(D)). The table applies the higher tier because the consolidated loan is $600,000. Neither § 253-a nor the Tax Department’s MT-15 instructions say directly whether the threshold is measured by the gap or by the consolidated debt. If the recording office applies the under-$500,000 tier to the $100,000 gap alone (2.05% gross, 1.80% borrower net), the borrower pays $1,770 instead of $1,895. The closer’s figure, checked against the ACRIS “Calculate Taxes / Fees” tool, controls.

The same refinance on a one-family house in Westchester outside Yonkers (1.30% gross, 1.05% borrower net) costs the borrower $6,270 without a CEMA and $1,020 with one.

The savings are only worth it if they exceed the added costs described below. A CEMA on a small balance, or a refinance where the old loan is nearly paid off, may save less than it costs.

Refinance CEMA vs purchase CEMA

Refinance CEMA. The borrower’s own existing mortgage is assigned to the new lender. This is the common case. The borrower controls the request but depends on the old lender to process it.

Purchase CEMA. The seller’s existing mortgage is assigned to the buyer’s lender and consolidated with the buyer’s new loan. The buyer pays tax only on the amount above the seller’s assigned balance. It needs the seller to agree (usually in the contract), the seller’s lender to assign, and the buyer’s lender to accept the assignment. Practitioners describe purchase CEMAs as uncommon because of that coordination (Brick Underground). Sellers sometimes ask the buyer to share the savings or cover the seller’s added costs, since the seller gets no tax benefit and takes on extra steps to close.

Co-ops cannot use a CEMA. A co-op loan is secured by shares and a proprietary lease, not a recorded mortgage on real property. There is no mortgage recording tax on a co-op share loan to begin with, and no mortgage to assign (Tax Law § 250).

What a CEMA adds in cost

No statute fixes CEMA fees. In practice, the costs include:

Existing lender’s assignment fee. Set by the servicer. New York servicers must publish a schedule of their standard fees and may charge only for services actually rendered at a cost reasonably related to the service (3 NYCRR § 419.5). One national servicer’s New York schedule, for example, lists a CEMA fee of $500 to $750.
Attorney fees. The old lender’s counsel often charges to prepare the assignment and release the collateral file. The new lender’s counsel and the borrower’s attorney typically charge extra for the CEMA documents.
Title and recording charges. More instruments are recorded (assignment, gap mortgage, CEMA), each with its own recording fees, and the title company must examine the prior mortgage chain. These appear as separate lines on the title bill.

Get these quotes before committing. The new lender must also offer CEMA on the loan program; not all do.

How long it takes and why

There is no statutory deadline for an assignment. The timeline depends on the existing lender, and it is the most common reason a CEMA slows a closing. Brick Underground, quoting New York practitioners, puts CEMA approval at four to eight weeks, with longer delays possible.

What drives the time:

The old lender’s process. Some servicers have dedicated CEMA desks; others route requests slowly. Approval is at the lender’s discretion.
Locating the original note. If the loan was sold or securitized, the note may sit with a document custodian, and endorsements or allonges have to be traced back to the original lender.
Gaps in the chain. A missing endorsement, an unrecorded prior assignment, or an earlier consolidation that was not documented cleanly has to be fixed or accepted by the new lender before closing.
Rate lock. The CEMA has to be complete before the lock expires, so start it when the loan application is made, not when the file is clear to close.

Real Property Law § 274-a(2) gives owners of owner-occupied one- to six-family homes and residential condo units a way to demand a payoff statement and related documents, which the lender must deliver within 30 days of a proper written demand. It does not require the lender to assign the mortgage.

CEMA mechanics for attorneys

The tax saving depends on the old mortgage passing to the new lender intact, so most CEMA problems come from the paper trail behind it.

Note transfer and the assignment. The mortgage passes by recorded assignment; the note passes separately, by endorsement. Under UCC § 3-202(2), an endorsement must be on the note or on a paper “so firmly affixed thereto as to become a part thereof,” which is the allonge. A loose allonge draws objections in practice. Fannie Mae requires the lender to keep possession of every original note listed on the CEMA’s Exhibit A, even though only the consolidated note goes to the document custodian (Selling Guide E-2-01).

Chain gaps. Exhibit A must list every prior note, mortgage, assignment and consolidation being combined. If an assignment in the chain was never recorded, the party now assigning is not the holder of record. The usual cure is to record the missing assignment before closing, or obtain a corrective assignment from the last assignee of record. Whether to close over a gap with a post-closing undertaking is a lender and underwriter decision (practice).

Lost notes. No New York statute makes a lost note affidavit sufficient for a CEMA. Statutory relief for a lost instrument runs through a court: UCC § 3-804 lets the owner sue on it, with security of at least twice the unpaid amount. In practice, whether a lost note affidavit and indemnity from the old lender is accepted is up to the new lender, its investor and the title underwriter.

Gap mortgage and consolidation. The gap mortgage secures only the new money and carries the only taxable amount. The CEMA then combines it with the assigned mortgages into one lien, backed by one consolidated note.

The § 255 affidavit. The Tax Department’s regulation, 20 NYCRR 645.3, requires the affidavit in duplicate at recording, made by the mortgagor, mortgagee or another person with knowledge. It must show each prior mortgage’s parties, recording data, original principal and tax paid, the unpaid balance on the date of the CEMA, and any new funds. The Westchester County Clerk publishes a matching checklist.

Later satisfaction. When the consolidated loan is paid, the satisfaction must come from the last assignee of record and recite the chain (RPL § 321). A satisfaction signed by the original lender after the CEMA assignment is a wrong-party satisfaction; see clearing an old or unsatisfied mortgage.

What to do next

Ask the new lender at application whether it offers CEMA on your loan, and what it charges.
Get the existing lender’s CEMA fee and process. Your attorney or the new lender’s CEMA team usually submits the request.
Compare savings against cost using your actual balance, new loan amount and property type.
On a purchase, negotiate the CEMA into the contract and confirm the seller’s lender will assign before relying on the savings.
Check the closing figures. Confirm the taxed amount equals the new money only and that a Section 255 affidavit is being recorded.

Official sources

Korvane Title is preparing to launch in New York. It is not licensed as a title insurance agent and does not accept title orders. Content on this site is general information, not legal advice.