NY Loophole Saves Borrowers Money on Refis.

New York -- In New York State, there is an alternative method that allows consumers to save money on their mortgage tax and title charges when they refinance their loans.

According to Scott Kapchan of International Title Agency here, this tool is known as a Consolidation Extension Modification Agreement. The CEMA is the document that allows the borrower to take advantage of this legal loophole in New York State.

The industry has experienced such a tailspin, according to Mr. Kapchan, that before the aforementioned innovation, New York borrowers had to expend so much money in closing costs, that it almost didn't pay to refinance at all, especially if they just did it in recent years.

By using a CEMA, the customer pays a tax the difference between the existing mortgage and the new mortgage and not the tax on the entire loan. This is beneficial because the borrower doesn't have to pay mortgage tax all over again on the amount financed previously, Mr. Kapchan said.

On the other hand, in a traditional refinance, the original mortgage note is cancelled and the lien is released. This subjects the new mortgage to the full tax burden.

"What is interesting is that most people are not even cashing out which would result in no mortgage tax at all, with the exception of fees that the old bank and the title company may charge," he said.

In years past ...