Posted by Serina/VT on 10/17/07 1:42pm
Msg #216948

Question for NY people

I just had a very strange closing. Docs were sent to borrower so I had no chance to review them before the appt. Mid way thru the closing we come upon a 2nd note and mortgage in a much smaller amount. The borrower knew nothing about a 2nd loan so we called the title company. They said the 2nd note and mortgage were a correction note and mortgage (it did not say that on the documents anywhere) because the original mortgage that this new loan was paying off was not recorded properly as a CEMA. What is a CEMA, the lady at the title company couldn't explain what it was, only that it was a "NY thing"

The borrower refused to sign the 2nd note and mortgage, because they had todays date on them not the date 23 years ago. The note also had payments beginning on Dec 1, 2007.

Anyone ever seen anything like this before?

Reply by Yoli/CA on 10/17/07 1:47pm
Msg #216949

Bizarre .... n/m

Reply by maddieNJ on 10/17/07 2:35pm
Msg #216960

Check out http://bqnmortgages.com/services.html
It explains what a CEMA is - it's a way to avoid a lot of expensive taxes...

Reply by spnotaryplus on 10/17/07 4:57pm
Msg #217003

That is strange, especially calling it a "NY Thing". I've done quite a few CEMA's in New York and never heard of it. My advice is to be very careful with this one.

Reply by MikeC/NY on 10/17/07 7:14pm
Msg #217038

CEMA

CEMA = Consolidation, Extension and Modification Agreement. It's a legal way of getting around NY's mortgage tax.

For example, if your original mortgage was $250K, you paid tax on it; now you're going to re-fi and get a new mortgage for $300K, and you would normally have to pay tax on the full $300K. That's where the CEMA comes in - by consolidating the old and new mortgages, you only pay tax on the gap, or $50K. Saves the borrower a ton of money....

There are always two notes and two mortgages in a CEMA - the second set is for the gap amount (if you look at the documents, they're titled "Gap Note" and "Gap Mortgage". Both notes and mortgages get consolidated into one. It's a little confusing for the BO because they think they're signing two different notes when in fact they are consolidating them.

These may be unique to NY, but they're not uncommon here. It sounds like the lady from the title co. had no clue, and just gave them bad information. The original mortgage DID record; the CEMA only comes into play when you take out another mortgage. If the borrower refused to sign the second note, the loan probably wouldn't fund - someone on the lender side should have explained this to the borrower before you even got there.

Reply by JK/TX on 10/17/07 9:50pm
Msg #217063

Re: CEMA to Mike...

I think I have seen a post of this type before regarding NY loans and taxes. What type of taxes are you paying for a home loan there?

Reply by MikeC/NY on 10/17/07 11:29pm
Msg #217079

Re: CEMA to Mike...

<<I think I have seen a post of this type before regarding NY loans and taxes. What type of taxes are you paying for a home loan there?>>

It varies by county. In the county I'm in, the tax is 1.05% of the mortgage (lender pays 1/4 of the tax on the first $10K, or about $25). There's an additional 1% "mansion tax" on properties over $1 million.

A CEMA allows you to save money by only taxing you on the gap between the two mortgages - the justification is that you've already paid the tax on the first mortgage and shouldn't have to pay it again (makes sense, right?). I think you can only do a CEMA if the company doing the refi also holds the original note and mortgage; most people refinancing don't do it that way, so they end up getting hosed on the taxes

The mortgage tax is on the purchaser (or borrower, in a refi). We also have a "mortgage transfer tax" that the seller has to pay on top of that at closing - $4 per $1000. As far as real estate is concerned, NY gets into your pocket coming and going and everywhere in between....

Reply by JK/TX on 10/18/07 12:04am
Msg #217081

Re: CEMA to Mike...

OMG !!! All these taxes on top of property taxes? Geeze !! I have not had any NY property assignments so I don't know the settlement fees. I'm just taken back by the fact that you have to pay taxes on the loan funds!

I've closed many people from CA buying property here and they are so excited by how much property and house they can buy for so little money but then shocked by our property taxes which are 2.5 to 3. per 100. My family in Georgia just goes into a trace at the thought of our property taxes! Their property taxes are so little by comparison.

Now I'm really curious,,...,, what's the recording fee for filing your Deed and DOT?

Reply by MikeC/NY on 10/18/07 12:59am
Msg #217085

Re: CEMA to Mike...

<<Now I'm really curious... what's the recording fee for filing your Deed and DOT?>>

It depends on the county you're recording in - I think the average for recording a mortgage (we don't do DOTs here) is about $200 or so. Deeds cost about the same, but it gets confusing. Here's the web page for my county listing the fees:

http://www.co.suffolk.ny.us/webtemp3.cfm?dept=33&id=1138

I'm not sure what the "Commissioner of Education" has to do with recording deeds, but there you go...

Reply by Serina/VT on 10/18/07 4:20am
Msg #217093

Thanks Mike :)

Thanks for the explaination, I will pass this onto the borrower today, altho maybe I shouldn't, UPL and all that The 2nd note and Mortgage did not say GAP anywhere, and were the exact same format as the 1st, otherwise I think we might have been able to figure it out. So sad that the people at the title company couldn't have explained that yesterday.