Refinance and CEMA closing checklist

What are the steps, in order?

1. Ask about the CEMA in the first conversation with the lender. A consolidation, extension and modification agreement lets the existing mortgage be assigned to the new lender and consolidated, so mortgage recording tax is paid only on new money. Both lenders have to agree, and the assignment takes weeks, so this is a week-one question, not a week-six one.Application
2. Order the payoff letter and confirm the good-through date. Order the payoff from the existing servicer with per diem interest and a good-through date past your target closing. If the CEMA is happening, the request is for an assignment package rather than a payoff, and the two requests go to different departments.Weeks 1 to 3
3. Order the title report for the lender’s policy. A refinance is insured for the lender only. The search still runs the full chain, because a judgment docketed against you since the purchase, or an unreleased second mortgage, is exactly what would defeat the new lender’s priority.Weeks 1 to 3
4. Deal with junior liens and open home equity lines. A second mortgage or home equity line has to be paid and discharged, or subordinated in writing to the new loan. A line of credit must also be frozen and closed in writing, because an open line can be drawn after the payoff figure is issued and before recording.Weeks 2 to 5
5. Confirm the prior policy for the reissue rate. Locate the owner’s policy from your purchase. Where the prior policy is available and the transaction qualifies, the schedule filed with the State provides a reissue rate on the new lender’s policy. No prior policy means no reissue rate, so this is worth a search of the closing binder.Weeks 1 to 3
6. Assemble the CEMA package. A CEMA needs the assignment of the existing mortgage, the consolidation and extension agreement with its Exhibit A consolidated note, the gap note and gap mortgage for the new money, and Form 255 claiming the exemption on the consolidated amount.2 to 4 weeks before closing
7. Confirm violations and permits do not sit in the way. A refinance lender reads the same municipal searches a purchase lender does. An open permit or an unresolved OATH (formerly ECB) matter can turn into a condition on the commitment, and on a one to four family it can reach the Certificate of Occupancy.Weeks 2 to 5
8. Review the Closing Disclosure and the rescission notice. On a refinance of a primary residence you receive a notice of right to cancel and the loan does not fund until the three business day rescission period runs. Count the days on the calendar, because it moves the funding date, not the signing date.3 days before funding
9. Verify wire and disbursement instructions by telephone. Refinance proceeds go out to a payoff department and, on a cash-out, to you. Confirm both sets of instructions by telephone at numbers you obtained independently, and never accept a change to instructions that arrives by email.At closing
10. Confirm the discharge and the new mortgage both recorded. After funding, check ACRIS for the satisfaction of the old mortgage and the recording of the new one or of the consolidation agreement. An unreleased paid mortgage is the single most common exception on the next transaction.Weeks after closing

Which documents do you need?

• Note, mortgage and the lender’s complete loan package
• Payoff letter with per diem interest and a good-through date
• Assignment of the existing mortgage, where a CEMA is being done
• Consolidation, extension and modification agreement with the consolidated note as Exhibit A
• Gap note and gap mortgage covering the new money
• Form 255 claiming the mortgage recording tax exemption on the consolidated amount
• TP-584 filed for the CEMA even though no property is conveyed
• Lender’s policy in the amount of the new loan, with no owner’s policy issued
• Notice of right to cancel, on a refinance of a primary residence
• Subordination agreement or discharge for any junior lien
• Closing Protection Letter issued to the lender
• Written confirmation that a home equity line is frozen and closed

Which searches does this transaction call for?

• Title search through the chain, run to confirm the new lender’s lien priority
• Judgment, federal tax lien and state warrant search against the borrower
• Bankruptcy search against the borrower
• Search for junior mortgages, home equity lines and mechanic’s liens of record
• Tax search for arrears that would take priority over the new mortgage
• DOB and OATH (formerly ECB) violation search where the lender conditions on it
• Patriot search against the borrower
• Assignment chain search on the existing mortgage, which is what makes a CEMA possible

What else should you read before closing?