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

A CEMA lets you avoid paying New York’s mortgage recording tax twice on the same debt. CEMA stands for consolidation, extension and modification agreement. Instead of paying off your old mortgage, your old lender hands it to your new lender, and the two loans are combined into one. You pay the tax only on the new money.

On a typical New York City refinance, that can save thousands of dollars. The trade-off is extra paperwork, extra fees and extra time, because your old lender has to cooperate.

The rule applies 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 loan amount. In a normal refinance, the old loan is paid off and the new mortgage is taxed on its full amount. That happens even though tax was already paid on the old balance years earlier.

New York tax law exempts a mortgage that only adds to debt already taxed under a recorded mortgage. If it also covers new money, tax is due on the new money only. A CEMA is built to fit this rule. The old mortgage stays alive, moves to the new lender, and the CEMA adds to it.

Two terms people mix up:

Mortgage recording tax is not transfer tax. Transfer tax is paid on a deed when property is sold. Mortgage recording tax is paid on a mortgage, so it comes up on refinances as well as purchases. The borrower pays most of it.
“MECA” means the same thing as CEMA. You will see it in forums and emails. The standard term is CEMA.

The documents in a CEMA

Document	What it does
Assignment of mortgage	Old lender transfers your loan to the new lender
Gap note and gap mortgage	Cover the new money only
Consolidated note	Replaces all the old notes with one promise to pay
CEMA	Combines the mortgages into one and sets the new terms
Section 255 affidavit	Sworn statement that claims the tax break

The assignment. Your old lender signs it, not you. It includes a sworn statement that the new lender is not just a stand-in acting for you (a “nominee”), and that the mortgage still secures a real debt (New York property law). The old lender must also hand over the original note (your written promise to repay), properly signed over to the new lender.

The gap mortgage. Only this part is taxed. In NYC and Westchester, the borrower’s tax on a one- or two-family home is reduced by $30. That reduction applies to the gap mortgage when it is recorded as a separate mortgage, but not to the combined mortgage (state tax department guidance).

The CEMA and consolidated note. For loans sold to Fannie Mae or Freddie Mac, lenders use a standard form, Form 3172, New York Consolidation, Extension and Modification Agreement. Its attachments list every older note, mortgage, assignment and consolidation being combined. Fannie Mae requires this form and says New York law allows CEMAs on refinances “and sometimes purchase money mortgages.”

The Section 255 affidavit. You claim the tax break at recording by filing a sworn statement with the recording office (New York tax law). In practice it lists the older mortgages, where they were recorded, the tax paid on them, the unpaid balance being combined and the new money. If the break is missed at recording, you can claim a refund from the state tax department with a sworn statement.

After closing, the old mortgages are not released one by one. Later, a single satisfaction (the lender’s paid-in-full release) of the combined mortgage clears the whole chain. That is why a property with a CEMA can show several older mortgages in ACRIS, the city’s online property records, with no release of their own. See How to read ACRIS for title.

Worked example: NYC refinance

Hypothetical: a one-family house in Queens. You owe $500,000 and refinance into a new $600,000 loan from a bank. The rates come from the state’s mortgage recording tax return, Form MT-15, as set out in the mortgage recording tax guide. The total is 2.175% for a one- to three-family house with a loan of $500,000 or more, and the lender pays 0.25% of that.

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

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

One point to confirm on each deal. In NYC, the rate depends on whether the loan is under or over $500,000 (city rate rule). The table uses the higher rate because the combined loan is $600,000. Neither the law nor the tax department’s instructions say directly whether to measure the gap or the combined loan. If the recording office applies the lower rate to the $100,000 gap alone (2.05% total, 1.80% for you), you pay $1,770 instead of $1,895. The figure from the title company’s closer, checked against the ACRIS “Calculate Taxes / Fees” tool, is the one that counts.

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

The savings only help if they are bigger than the added costs below. On a small balance, or when the old loan is nearly paid off, a CEMA may save less than it costs.

Refinance CEMA vs purchase CEMA

Refinance CEMA. Your own mortgage moves to your new lender. This is the common case. You make the request, but you depend on your old lender to process it.

Purchase CEMA. The seller’s mortgage moves to the buyer’s lender and is combined with the buyer’s new loan. The buyer pays tax only on the amount above the seller’s balance. It needs three things:

the seller agrees, usually in the contract
the seller’s lender agrees to transfer the mortgage
the buyer’s lender accepts the transfer

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. The seller gets no tax benefit and has extra steps to close.

Co-ops cannot use a CEMA. A co-op loan is backed by shares and a lease, not by a recorded mortgage on the property. There is no mortgage recording tax on a co-op loan to begin with, and no mortgage to transfer (New York tax law).

What a CEMA adds in cost

No law sets CEMA fees. In practice, expect:

Your old lender’s fee. Set by the company that services your loan. New York servicers must publish a list of their standard fees. They may charge only for work actually done, at a cost reasonably related to that work (state servicer rules). One national servicer’s New York fee list, for example, shows a CEMA fee of $500 to $750.
Attorney fees. The old lender’s lawyer often charges to prepare the assignment and release the loan file. The new lender’s lawyer and your own attorney typically charge extra for the CEMA documents.
Title and recording charges. More documents are recorded (assignment, gap mortgage, CEMA), each with its own recording fee. The title company also has to check the chain of older mortgages. These show as separate lines on the title bill.

Get these quotes before you commit. Your new lender must also offer CEMAs on your loan program; not all do.

How long it takes

No law sets a deadline for the old lender to transfer the mortgage. The timeline depends on that 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 slows it down:

The old lender’s process. Some servicers have dedicated CEMA teams; others are slow. Approval is up to the lender.
Finding the original note. If the loan was sold, a document storage company may hold the note. Each signature that transferred it has to be traced back to the original lender.
Gaps in the paper trail. A missing transfer signature, a transfer that was never recorded, or an earlier consolidation that was poorly documented has to be fixed, or accepted by the new lender, before closing.
Your rate lock. The CEMA must be finished before your locked rate expires. Start it when you apply for the loan, not when the file is ready to close.

If you own and live in a one- to six-family home or a residential condo unit, you can demand a payoff statement and related documents in writing. The lender must deliver them within 30 days of a proper written demand (New York property law). This law does not force the lender to transfer the mortgage.

What to do next

Ask your new lender when you apply whether it offers a CEMA on your loan, and what it charges.
Get your old lender’s CEMA fee and process. Your attorney or the new lender’s CEMA team usually sends the request.
Compare savings against cost using your real balance, new loan amount and property type.
If you are buying, get the CEMA into the contract and confirm the seller’s lender will transfer the mortgage before counting on the savings.
Check the closing figures. Confirm the taxed amount is the new money only and that a Section 255 affidavit is being recorded.

Details for attorneys and title professionals

The tax saving depends on the old mortgage reaching the new lender intact. Most CEMA problems come from the paper trail behind it.

Note transfer. The mortgage passes by recorded assignment. The note passes separately, by endorsement (a signature transferring it). New York’s commercial code requires the endorsement to be on the note or on a paper “so firmly affixed thereto as to become a part thereof,” called an allonge. A loose allonge draws objections in practice. Fannie Mae requires the lender to keep every original note listed on the CEMA’s Exhibit A (the attachment listing the older loans), even though only the consolidated note goes to the document custodian (Fannie Mae custodial rules).
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 owner of the mortgage shown in the public records). The usual fix is to record the missing assignment before closing, or get a corrective assignment from the last assignee of record (the last lender the records show the mortgage was transferred to). Whether to close over a gap with a promise to fix it later is a lender and underwriter decision (practice, not law).
Lost notes. No New York statute makes a lost note affidavit enough for a CEMA. The law’s remedy for a lost note runs through a court: the owner can sue on it, and must post security (a guarantee against later claims on the note) of at least twice the unpaid amount (New York’s commercial code). In practice, whether a lost note affidavit and indemnity (a promise to cover any loss) from the old lender is accepted is up to the new lender, its investor and the title underwriter.
Gap mortgage. It secures only the new money and carries the only taxable amount. The CEMA then combines it with the assigned mortgages into one lien (one legal claim on the property), backed by one consolidated note. The tax department guidance on the $30 reduction is TB-MR-5, Examples 1 and 2.
The Section 255 affidavit. The tax department’s regulation requires it in duplicate at recording, made by the borrower, the lender 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 CEMA date, and any new funds. The Westchester County Clerk publishes a matching checklist.
Later satisfaction. When the consolidated loan is paid off, the satisfaction must come from the last assignee of record and list each assignment in the chain (New York property law). A satisfaction signed by the original lender after the CEMA assignment comes from the wrong party; see clearing an old or unsatisfied mortgage.

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.