CEMA stands for Consolidation, Extension, and Modification Agreement. It’s a New York specific mechanism that lets a borrower (on a refinance) or a buyer (on a “purchase CEMA”) reuse an existing, previously taxed mortgage instead of recording an entirely new one, so the State only charges mortgage recording tax on any new money being added. The legal authority for this treatment sits in Tax Law §255, which governs “supplemental” and consolidation mortgages and taxes only any new or further indebtedness created. (New York State Senate)
The core tax break: “tax on the gap” ( “new money”)
Without a CEMA, a refinance or new purchase mortgage is taxed on the full mortgage amount. With a CEMA, the existing, already-taxed balance is assigned and consolidated into the new loan, and Mortgage Recording Tax (MRT) is charged only on the increase-i.e., new loan amount minus the outstanding principal of the old assigned mortgage.
Example (NYC numbers):
- Old mortgage principal outstanding: $400,000
- New mortgage amount: $650,000
- “New money” = $250,000 → MRT applies to $250,000 only (not $650,000). Using effective NYC rates, buyer’s share would be ~1.925% × $250,000 = $4,812.50, plus lender’s statutory 0.25% share on the same taxable base (see next section). (Hauseit)
Who pays the 0.25% “lender portion”?
New York imposes a special additional mortgage recording tax of 0.25% under Tax Law §253(1-a). By statute and guidance from the NYS Tax Department, this 0.25% is payable by the mortgagee (the lender) and cannot be passed to the borrower for most 1–6 unit residential properties-this is the “anti-pass-through” rule. The lender-paid portion still exists and is calculated only on the new money.
Commercial deals: That anti-pass-through protection is a residential concept. In commercial transactions, the 0.25% special additional tax is not shielded the same way so it’s commonly borne by the borrower/buyer.
Where CEMAs do and don’t apply
- Refinances: A CEMA lets the new lender receive an assignment of the old mortgage and consolidate it with the new loan. MRT is then due only on the increase.
- Purchases (“purchase CEMA”): If the seller’s existing lender agrees to assign the seller’s mortgage to the buyer’s new lender at closing, the buyer pays MRT only on the gap between the new mortgage and the assigned unpaid balance. This saves thousands at NYC rates. These deals are paperwork-heavy and require cooperation from both lenders.
- Co-ops: No MRT applies at all because a co-op is not “real property” under NY mortgage tax law, it’s a personal-property (UCC) loan. CEMAs are unnecessary and effectively unavailable on co-op financing.
What “counts” as the taxable amount in a CEMA?
A consolidation/supplemental mortgage isn’t taxed unless it creates or secures new indebtedness. So your recorder collects MRT on only the new money, with proper §255 affidavit(s) showing the old mortgage details, original tax paid, and the outstanding principal being consolidated. (New York State Senate)
Sources
- NYS Tax Dept – Mortgage Recording Tax overview (components and local add-ons). (NY Tax Department)
- Tax Law §255 (supplemental/consolidation rule—tax only on new indebtedness). (New York State Senate)
- Tax Law §253(1-a) (special additional 0.25% tax). (Justia Law)
- NYS TSB-M-92(4)R (who must pay the 0.25% “lender tax” and the anti-pass-through rule for 1–6 family residential). (NY Tax Department)
- NYC DOF MRT page (how NYC administers/records the tax via ACRIS). (New York City Government)