CEMA (Consolidation, Extension and Modification Agreement)

CEMA: What the Market Actually Requires

The mechanics: instead of satisfying the old mortgage and recording a new one, the existing lender assigns the mortgage and note to the incoming lender. The new lender advances any additional proceeds under a gap mortgage, then consolidates the assigned mortgage and the gap mortgage into a single restated loan through the CEMA itself. New York imposes mortgage recording tax only on newly secured principal, so the assigned balance passes tax-free and only the gap is taxed. The structure exists because of New York's recording tax and has no purpose in states without one.

Lender cooperation is the variable. Banks and life companies routinely assign their mortgages for a modest fee plus legal costs, and most lenders active in New York will accept an incoming assignment as a matter of course. CMBS is the persistent problem: the mortgage sits in a securitized trust, servicer consent is slow, fees run higher, and some servicers simply refuse, so borrowers refinancing out of CMBS in New York should get the CEMA answer in writing early. Timing matters on the way in as well, since the assignment process has to be choreographed against any rate lock so delays do not burn the lock period.

Run the break-even before committing: a CEMA adds legal fees on both sides, an assignment fee, and typically two to four weeks of timeline, so small loans or small gaps may not justify it. On acquisitions, a purchase CEMA assigns the seller's existing mortgage to the buyer's lender, saving the buyer recording tax, but it requires seller cooperation negotiated into the contract. Sophisticated New York borrowers put CEMA cooperation language in every term sheet and purchase agreement as a matter of habit.

Why It Matters for Your Loan

On New York deals, mortgage recording tax is one of the largest single closing costs, and a CEMA is the only standard tool that reduces it. The savings frequently run into six figures at institutional loan sizes, but capturing them requires choosing lenders that cooperate with assignments and building the extra weeks into the closing timeline. Commercial Lending Solutions raises the CEMA question at term sheet stage on every New York financing so the savings are engineered in from the start, not discovered too late.