NY Purchase CEMA - Save Everyone Money and Increase Sales

Industry Observer with MortgageBrokerPros.com

I truly believe that this will be the next great think for real estate agents and brokers alike, the Purchase CEMA. What exactly is a CEMA? A CEMA is a Consolidation, Extension Modification Agreement or simply put, a way for buyers to save thousand of dollars on New York State Mortgage Tax.

Whether you've ever sold a home or purchased a home in New York you've paid the dreaded New York State mortgage tax, that annoying tax that differs from county to county. In the 5 boroughs of New York City the mortgage tax costs 1.80% minus $25 of the amount of the mortgage up to $499,999. Even more for loan amounts above of $500,000 and above.  Now, how can a purchase CEMA help in what is a tough NYC market? Let's look at some numbers.

Say you have a buyer who is purchasing a home for $500,000 and is making a 20% down payment in Queens County. The buyer would be obtaining a mortgage for $400,000.  The state mortgage tax would be $7,175. Now let's take a look at how a CEMA can help.

Let's say the seller currently has a mortgage on the home for $350,000. Utilizing a CEMA the buyer would have to pay the mortgage tax on the spread between his/her mortgage amount and what the seller holds on his/her mortgage. Now, instead of the buyer paying mortgage tax on $400,000, the buyer is now paying mortgage tax on the $50,000 difference or $875. The buyer is now paying $875 in mortgage tax as opposed to $7,175 for a savings of $6,300. However, there are costs associated with a purchase CEMA of approximately $1500. The cost could be a bit more or a bit less depending on what the sellers' mortgage company and buyers' mortgage company will charge for the preparation of the necessary documents. In this example, factoring in the costs, the buyer would be saving approximately $4,800 or paying $2,375. Do you think a buyer would be unhappy having to pay $2,375 instead of $7,175?

Hey Anthony, that's great but what's in it for the seller? In addition to now potentially having more buyers since there are less out of pocket costs for buyers, the seller can also save a few dollars as well. The seller can save on the New York State Transfer Tax they have to pay at closing as well. Using the above example, the seller would have to pay $2,000 in New York State Transfer Tax on a sales price of $500,000. Since the seller is now assigning their mortgage, the seller now only has to pay the tax on the difference between the sales price and the amount of the mortgage they are assigning. Again, using the above example of a sales price of $500,000 where the seller has a mortgage of $350,000, the seller is paying the tax on $150,000 instead of $500,000. The seller is now paying $600 instead of $2,000 and saving $1,400.

The buyer saves $4,800, the seller sells his/her home and saves $600, you have a sale and everyone is happy. Sounds easy, doesn't it? Well not quite. First of all, everyone has to be on the same page. The seller must be willing to help the buyer, the sellers' mortgage company must be willing to assign the mortgage tax, the buyers' mortgage company must be willing to accept the assignment, and the title company must be on board as well as the buyers and sellers attorneys. Most importantly, the person taking care of the purchase CEMA must be knowledgeable and have experience.  If done correctly, you can expect a 90% success rate. However, it's important to look at all the numbers as there will be times when the savings on a CEMA are minimal and may not even be worth doing.

It's important to partner with someone who knows what they're doing, whether or not a purchase CEMA can be done and whether or not if it will be beneficial to have it done.  If you need any more information on how to use purchase CEMA to increase your listings or are looking for a purchase CEMA partner to increase sales, feel free to contact me through my profile, call my office at 718-381-2424, or call me on my cell at 917-650-6042.



Comments (9)

Arlene Trunzo

Hi Anthony,

Thanks for the information.  It's funny a few months ago I closed on a investment property and the buyer brought Cema to my attention.  He was working with a lender that was a friend of his, his friend told him about it.  That was the first time I heard of Cema. I do not remember why he did not end up doing it. He closed on the property the conventional way.  It's good to have the information and knowledge .



cmyrealtor@aol.com    atrealestatespecialists.com


Mar 28, 2008 12:52 PM
Laura Lazar Kearns

JUST learned about this today myself, and did a little research and found your blog. Good explanation...I may quote you in my blog shortly...



Nov 19, 2008 08:53 AM

Thank you.

Very good explanation.

I am trying to refinance my morgage.

I contacted my currect mortgage bank - HSBC, asking about CEMA.

They told me that they stopped doing any assestments and will not cooperate.

Anything else can I do? Is it legal ?

Thank you

Feb 05, 2009 05:02 AM
Anthony Torres


Yes it's 100% legal for your current mortgage bank to deny the request. Unfortunately, it is up to the lender as to whether or not they will allow for it.

Feb 11, 2009 03:55 AM
Todd Burnham (Burnham Law Firm)

HSBC will only perform a CEMA if it is HSBC to HSBC.

Feb 13, 2009 01:09 AM

i have a friend he is tring to refinancing his home he is not on the mortgage nor on the deed the mortgage and deed is in his wife's name ONLY, His wife would add him to the deed at closing. Can this guy apply for the NY CEMA. since he does not own this mortgage.



May 20, 2009 08:35 AM

I started the re-finance process about 3 months ago. I currently have my mortgage with HSBC. I was not told about the CEMA till about 3 weeks ago at that time I was not sure if it was beneficial to us. We are now ready to do the CEMA and we find out that HSBC does not accept it anymore. Does anything hold for me that the process started 3 months ago before this came into effect, I believe it has only been in the last 2 months that HSBC has started not accepting them.

Jun 05, 2009 03:17 AM
Nathan - VA CEMA?


I am currently refinancing my home which I have a standard 30 year fixed mortgage.  I am trying to refinance into a VA Loan which I already have the certificate of eligibility for.  Wells Fargo stated that getting a CEMA is standard practice and the VA accepts it.  HSBC told me that the VA does not accept a CEMA.  What is the truth here?  Does the VA accept the CEMA?  I reached out to the VA but no one answers the phone and the mailboxes are full.



Any Veteran should stay far away from Wells Fargo.  I have my own personal horror story about my current refinance.  The mortgage consultant basically lied about the LTV percentage and had me pay for an appraisal, CEMA and termite inspection.  My property appraisal came in 25,000.00 HIGHER than the value we had based all the calculations on.  When I thought we were all set I get an email stating the appraisal value was actuallly 30,000.00 lower than needed.  I was shocked and perplexed, the mortgage consultant began stating I may have said that, etc.  I told him I have emails and documents from him with everything we agreed to.  Now he will not take my calls and the manager has never even called me back.  I paid all their fees and followed their directions for the whole refi process.  Because of errors on their part, and lack of their own companies VA refi policies, I am out $1,500.00 in fees.  Great treatment for a disabled veteran who si recently back from Iraq. 

If anyone has any advice on the CEMA or dealing with Wells Fargo please respond to my post.   I also filed an executive complaint with Wells Fargo and they failed to get back to me in the timeframe they specified.  Also, the managers failed to get back to me.    Nice to see our TARP money is being put to good use!

Oct 19, 2009 03:15 PM
david abramson

ING Direct will not release my CEMA when I attempt to transfer my Mortgage to another bank. They were willing to accept my CEMA from another bank, which ensured I did not have to pay mortgage tax twice. Every other bank does so. I was not made aware of this when I transfered my mortgage to ING Direct. They did not say, "just to let you know, we are happy to assist you in transfering your CEMA from Citibank, but so you are aware, we will not allow you to transfer the CEMA from us to another bank". If this practice is not illegal, it should be. I will be contacting my State Represenatives immediately to discuss with them as well.   

Mar 05, 2010 11:42 AM