Adam Leitman Bailey, P.C. represents multiple prominent lenders in the real estate industry. Recently, the firm’s transactional department represented a lender in a deal that involved a Consolidation, Extension, and Modification Agreement (“CEMA”). A CEMA is an agreement between an individual’s current lender and their new lender. A seller can assign their mortgage to a buyer that is obtaining financing through a CEMA. The agreement combines two or more loans into one consolidated loan that reduces the amount of Mortgage Recording Tax that a New Yorker will have to pay.

Pursuant to New York law, a mortgage recording tax is imposed on the recording of real property located within New York State. CEMAs do not apply to cooperative apartments because coops are not considered real property and there is no mortgage recording tax that applies to a loan relating to a coop. The tax is a percentage of a principal loan amount. Under Section 255 of the New York Tax Law, a borrower can bypass paying the mortgage recording tax on the unpaid principal balance of their current loan and only pay the tax on the new loan that is issued by their new lender.

As the new lender’s attorney, Adam Leitman Bailey, P.C. communicated with the assigning lender’s counsel to complete the CEMA. This involved requesting that the assigning lender’s counsel draft and Assignment of Mortgage and an Allonge and provide us with copies of all original notes, mortgages, notes, assignments of mortgage and allonges that were in the mortgage schedule. At the closing, the bank attorney provided the borrower with all of the necessary loan documents, including the CEMA, to sign and thoroughly explained each document to the borrower. Additionally, the bank attorney obtained all of the document requested from the assigning lender’s counsel. After the closing, the bank attorney sent the CEMA along with additional documents to the lender. The lender sent the CEMA back to the bank attorney signed. The bank attorney then drafted a Section 255 Affidavit requesting that the agreement be declared exempt from taxation pursuant to the provisions of Section 255 of the New York Tax Law. The bank attorney then sent the fully executed CEMA and Section 255 Affidavit to the title company to be recorded.

In representing a notable lender, Adam Leitman Bailey, P.C. was able to help save the borrower thousands of dollars as the CEMA resulted in a significant reduction in the amount of mortgage recording tax that the borrower had to pay.