What Is a New York CEMA Loan
A New York Consolidation, Extension and Modification Agreement (NY CEMA) is a special refinancing tool available only for properties in New York State. Instead of paying off your existing mortgage and creating an entirely new loan, the NY CEMA combines your current mortgage debt with any new money you're borrowing into one consolidated obligation.
Say you have a $300,000 existing mortgage and want to borrow an additional $50,000 in a cash-out refinance. With a traditional refinance, you'd pay off the $300,000 loan completely and get a new $350,000 mortgage. With an NY CEMA, your lender consolidates the existing $300,000 debt with the new $50,000 into one $350,000 loan without technically "paying off" the original mortgage.
The main advantage is potential savings on mortgage recording taxes, which can be substantial in New York. You typically only pay recording tax on the new money portion rather than the entire loan amount.
Required NY CEMA Documentation
Lenders must use the most current version of Form 3172, the New York Consolidation, Extension and Modification Agreement Single-Family Fannie Mae/Freddie Mac Uniform Instrument. This form is updated periodically, so lenders need to verify they're using the current version from Freddie Mac's website.
The borrower must also execute a Consolidated Note. This new note replaces all previous notes secured by the property and establishes the terms for the combined debt.
What Goes in the Delivery Package
When your lender delivers the loan to Fannie Mae, they must provide a complete NY CEMA delivery package to their document custodian. This package contains several specific documents beyond what's required for a standard mortgage.
The original NY CEMA or a certified copy from the recorder's office must be included. This is the main agreement that consolidates your existing and new debt.
The package must include four specific exhibits. Exhibit A lists all the obligations being consolidated - every note, security instrument, assignment, and related agreement that predates the current NY CEMA. Exhibit B contains the property description, often copied from Schedule A of the New York Mortgage. Exhibit C is a copy of the Consolidated Note with the appropriate fixed-rate or adjustable-rate language at the top. Exhibit D is the current New York Single-Family Uniform Security Instrument (Form 3033) with all blanks filled in.
The original Consolidated Note signed by you and endorsed in blank by the lender is also required. This note must include specific language at the top identifying it as either a "Consolidated Note" or "Consolidated Adjustable-Rate Note" and stating that it replaces the notes described in Exhibit A of the NY CEMA.
Understanding the Consolidated Note Requirements
The Consolidated Note is crucial because it becomes your single payment obligation. The note must include specific language depending on whether you have a fixed-rate or adjustable-rate loan.
For fixed-rate loans, the note must state: "This Note amends and restates in their entirety, and is given in substitution for, the Notes described in Exhibit A of the New York Consolidation, Extension and Modification Agreement dated the same date as this Note."
Adjustable-rate loans require similar language but with "Consolidated Adjustable-Rate Note" as the heading. This language legally establishes that your new note replaces all previous notes rather than simply adding to them.
Why Fannie Mae Has These Specific Requirements
Fannie Mae's detailed documentation requirements exist because NY CEMA transactions are more complex than standard refinances. The agency needs clear evidence of what debts are being consolidated and how the new loan structure works.
The requirement for Exhibit A to list all previous obligations ensures there's a complete paper trail. Without this documentation, it would be difficult to verify that all existing liens are properly addressed in the consolidation.
The specific language requirements for the Consolidated Note prevent confusion about whether the borrower has multiple payment obligations or just one. The legal language makes it clear that all previous notes are replaced, not supplemented.
Standard Mortgage File Requirements Still Apply
Even though NY CEMA loans have special documentation requirements, they must still meet all standard Fannie Mae mortgage file requirements. This means your lender must collect and maintain all the usual income documentation, asset verification, credit reports, and property appraisals required by [[3301.2]], [[3302.1]], and [[3401.2]].
Your employment verification, tax returns, bank statements, and other financial documents follow the same guidelines as any other Fannie Mae loan. The NY CEMA structure doesn't change the underwriting standards for your ability to repay the consolidated debt.
Common Complications with NY CEMA Loans
One frequent issue occurs when borrowers or lenders don't properly identify all existing obligations that need to be listed in Exhibit A. If there are multiple previous consolidations or modifications, tracking down every relevant document can be challenging.
Title issues can also complicate NY CEMA transactions. Since you're not technically paying off the existing mortgage, any title problems from the original loan can carry forward. Your lender needs to ensure the title work properly addresses the consolidation.
Recording tax calculations can be complex, especially if there have been previous NY CEMA transactions on the property. The tax benefits that make NY CEMA attractive can be lost if the documentation isn't handled correctly.
Some borrowers assume they can use NY CEMA for purchase transactions, but Fannie Mae only allows it for refinances. The existing mortgage debt that gets consolidated must already be secured by the New York property.
References
For the official guidelines, see 4101.11: Origination and delivery of Mortgages using a New York Consolidation, Extension and Modification Agreement (the "NY CEMA") in the Fannie Mae Selling Guide.
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Original Freddie Mac Guideline Text
This section contains requirements related to:
Documentation
Delivery package for a New York Consolidation, Extension and Modification Agreement (“NY CEMA”)
Mortgage file documentation
Freddie Mac will purchase refinance Mortgages secured by property located in New York State that are documented using an NY CEMA. The NY CEMA combines into one set of rights and obligations all of the promises and agreements stated in existing Notes and Mortgages secured by the Mortgaged Premises including, if new funds are advanced to the Borrower at the time of the consolidation, a new Note and Mortgage. The result is that the Borrower has one consolidated loan obligation, evidenced by a Consolidated Note that is paid in accordance with the terms of the NY CEMA.
(a)
Defined terms
The following defined terms apply to this section:
Defined terms related to Mortgages using an NY CEMA
Original Old Money Note
The original Note executed by the Borrower that is being consolidated, extended and modified by the newly executed NY CEMA
Original New Money (Gap) Note
The original Note executed by the Borrower at the time the current NY CEMA is executed that represents new funds advanced to the Borrower at the time of the current consolidation
In connection with the current financing transaction evidenced by the NY CEMA, the Borrower must execute a new original Note, referred to as the Consolidated Note, that consolidates, extends and modifies the Original Old Money Note and the Original New Money (Gap) Note, if any.
(b)
Documentation
When documenting a Mortgage using an NY CEMA, the Seller must use the most current version of the New York Consolidation, Extension and Modification Agreement Single-Family Fannie Mae/Freddie Mac Uniform Instrument (Form 3172). The current version can be found on Freddie Mac’s website at
https://sf.freddiemac.com/tools-learning/uniform-instruments/2021-updated-instruments
(opens in new window)
.
In addition, the Borrower must execute a Consolidated Note.
(c)
Delivery package for NY CEMA
For a Mortgage originated using the NY CEMA, the Seller must deliver the complete NY CEMA delivery package listed below to its Document Custodian.
The complete NY CEMA delivery package must include the following documents:
(i)
NY CEMA
The original NY CEMA or a copy certified by the recorder’s office.
(ii)
NY CEMA exhibits
Complete set of NY CEMA exhibits, as follows:
Exhibit A – A list, or a copy of a list, of the obligations being consolidated, modified and extended. All Notes, security instruments, assignments, consolidation agreements and related agreements that modify, consolidate or extend prior underlying obligations and which predate the current NY CEMA must be listed separately in Exhibit A.
Exhibit B – The property description of the Mortgaged Premises. A copy of Schedule A (Property Description) to the New York Mortgage may be used but should be marked as Exhibit B to identify it as an NY CEMA exhibit.
Exhibit C – A copy of the Consolidated Note (including any applicable addenda), with fixed-rate or adjustable-rate Note language inserted at the top of the first page. (The required language is stated in
(iii)
below.) Because this is a form document, Borrower signatures are not required.
Exhibit D – The most current version of the New York Single-Family Fannie Mae/Freddie Mac Uniform Security Instrument (Form 3033) with all blanks completed and any applicable riders attached. Because this is a form document, Borrower signatures are not required.
(iii)
The original Consolidated Note
An original Note executed by the Borrower and endorsed in blank. The Consolidated Note must be the most current version of the applicable Single-Family Fannie Mae/Freddie Mac Uniform Note with all blanks completed and any applicable addendum or addenda. The Consolidated Note must have the following language, as applicable, inserted at the top of the document:
For Fixed-Rate Notes:
Consolidated Note
This Note amends and restates in their entirety, and is given in substitution for, the Notes described in Exhibit A of the New York Consolidation, Extension and Modification Agreement dated the same date as this Note.
For Adjustable-Rate Notes:
Consolidated Adjustable-Rate Note
This Note amends and restates in their entirety, and is given in substitution for, the Notes described in Exhibit A of the New York Consolidation, Extension and Modification Agreement dated the same date as this Note.
(d)
Mortgage file documentation
With respect to Mortgages documented with the NY CEMA, Seller represents and warrants that the Mortgage file contains the documentation required by
,
3302.1(b)
and
3401.2(a)
.
