Lender Services
CEMA Transactions
Basic Information for Purchases or Refinances
CEMA stands for Consolidation, Extension and Modification Agreement
Consolidation — consolidates one or more prior loan(s) with a new loan
Extension — extending the term of the previous loan(s) through the new loan
Modification — modifying the terms of the prior loan(s) to match the new loan
Agreement — an agreement with the borrower and lender to do all of the above
The purpose of a CEMA is to avoid paying mortgage tax. NY Law provides that the mortgage tax need not be paid on the existing loan balance (referred to as the “old money”). Borrower pays the mortgage tax on the difference between the new loan balance and the old money (the “new money”).
How We Can Help
We will help to determine if it makes sense to do a CEMA for the borrower since there are more closing costs associated with the CEMA process and a CEMA might not always save the borrower money. If we determine that it does make sense, we will then make certain that the existing lender will accept the CEMA and the prior lender will assign out. The collateral documents must follow the mortgage chain which means that every note and assignment must have an allonge or an endorsement endorsing over to the next lender.
The process normally takes 4-6 weeks to obtain depending on the lender. The additional fees generally associated with the CEMA include the existing lender’s processing fee, CEMA attorney fees, bank attorney review and prep fee and additional recordings fees. Again, the fees vary with every lender but as for the recording fees, they range about $350.00 to $500.00.
Some Lenders do CEMAs for purchase transactions. In this scenario, the seller’s lender assigns the loan to the purchaser’s lender. Upon assignment, the purchaser’s lender releases the seller from any obligation in connection with the loan.
Co-op Transactions
Basic Information
You own shares in the Cooperative Corporation not the real property. The bank holds the
original stock and lease as collateral instead of a mortgage. If there is no current lender, then the borrower holds the original stock and lease. The borrower will have to get co-op board approval in order to purchase the unit. Some co-ops require board approval for refinances. Recognition Agreements are prepared prior to closing. They are prepared by either the lender or the bank attorney. All parties (lender, co-op board and borrower) sign the document and the original is brought to closing. Sometimes the lender allows the bank attorney to sign on their behalf. For refinances, we would order the original stock and lease from the current lender. This can take up to 30 days to obtain. Along with obtaining the documents, at closing a UCC-3 will have to be recorded to remove the current lender. A Lien search needs to be ordered with a title company. Typically the borrower does not have to purchase title insurance. The only fee involved with title would be for the lien search (ranges $250–$450) and the recording fee to record a UCC-1 ($125.00) and a UCC-3 for refinances ($95.00). The UCC-1 is filed on behalf of the lender to establish security interest in the shares associated with the unit.
How We Can Help
Once a file is opened by our office, we will draft the recognition agreements and forward to the borrower for signature. On a purchase, the purchaser’s attorney orders the lien search (they may wait until the borrower has board approval prior to ordering). The loan will not be able to close until the board has approved the prospective borrower. Typically the closing takes place at the co-op attorney’s office and requires 3-5 day notice.
On a refinance, we will order the lien search. Turnaround time is usually a week. Also, if the refinance is with a different lender, we will order the original stock, lease and payoff from the current lender. There is an additional charge from the co-op attorney to obtain the documents. The fee varies with each lender. We will be able to obtain that information for you prior to ordering the documents. Again the process can take up to 30 days to obtain the collateral documentation. Once the loan is ready to close, we will file a UCC-1 and a UCC-3 the day of funding. The closing can take place either at the branch, our office or the borrower’s home. Typically a refinance does not have to close at the co-op attorney’s office.