DocMagic customers may now request Consolidation, Extension and Modification Agreement ("CEMA") conventional and FHA fixed rate loan programs for New York refinance transactions to be added to their inventory of loan programs. Pursuant to HUD's Mortgagee Letter 2008-26, dated September 25, 2008, DocMagic's Compliance Department has created a new version of the FHA CEMA that matches Fannie Mae/Freddie Mac's CEMA Form 3172, except that all references to "Fannie Mae/Freddie Mac" Notes, Uniform Instruments, and Mortgages have been removed and replaced with references to "Federal Housing Administration."

In order for the CEMA MERS version (NY3172.MZM) or non-MERS version (NY3172.MSC) to populate correctly, particularly Exhibit "A" of the CEMA, the liens being consolidated by the CEMA should be entered in the "Prior Liens" section of the "Providers/Liens" tab of DocMagic in the manner shown below.

Once preliminary information is entered in the "Prior Liens" section, as shown above, click on the "Details" button to enter more detailed information about the subject lien. See below for an example.

If applicable, click on the "Assignment" tab in the "Recording Information" section to enter details about the prior assignment of the lien being refinanced.

Upon processing the DocMagic worksheet, DocMagic will sum the current balances of each prior lien entered in the Prior Liens details screen and subtract the sum total from the loan amount. If there is a difference greater than $0.00, then a Gap Note and Gap Mortgage will dynamically return in the loan package. For FHA CEMA loans, if the difference between the loan amount, including UFMIP, and the sum of the current balances of prior liens is greater than $0.00, there is a "gap" loan amount, and an FHA Gap Note and Gap Mortgage will return in the loan package. Note that the gap loan could equal only the amount of the financed UFMIP.

If there is a "gap" loan amount, Paragraph "1" of Exhibit "A" of the CEMA (Form 3172) will refer to both the "Gap" Mortgage and the "Gap" Note.

Below is a rendering of Exhibit "A" of the CEMA if the appropriate information is entered into the "Prior Liens Details" screen of DocMagic.

In addition to standard federal and New York disclosures, the following documents (with their DocMagic file names) will appear in a CEMA package, broken down by FHA and conventional loan packages:

Please take note of the following:

1. The Consolidated Fixed Rate Note must be attached as Exhibit "C" to the CEMA and signed by the Borrower(s) together with any applicable addenda. Note that the repayment terms of the Consolidated Note (e.g., the consolidated principal amount, the monthly principal and interest payment, the interest rate and provisions for any interest rate and monthly payment changes applicable to the consolidated obligations) must be set forth in the Consolidated Note. The dollar amount entered in the first blank in Section I of the CEMA and the consolidated principal amount of the Consolidated Note must be the same.
2. The New York Consolidated Mortgage and applicable riders must be attached as Exhibit "D" to the CEMA and need not be signed by the Borrower(s). The dollar amount entered in the first blank in Section I of the CEMA and the dollar amount entered in the corresponding blank in the Consolidated Mortgage must be the same.
3. If new funds are advanced at the time of the consolidation and modification evidenced by the CEMA, the new obligation must be evidenced by an original of the new money note (the "Gap" Note). The Gap Note will be the same form as the Consolidated Note except that the word "GAP" will appear in the title of the Gap Note, and the "consolidated verbiage" will be omitted.

   a. The dollar amount entered in the second blank in Section I of the CEMA and the dollar amount entered in the corresponding blank on the Gap Note must be the same. If no new funds are advanced at the time of the consolidation and modification, then the second blank in Section I of the CEMA should be $0.00. If there is a gap loan, then it will then become a part of the Consolidated Note and the Consolidated Mortgage. Although it is not necessary that the repayment terms of the new loan, as set out in the Gap Note, reflect the terms of the Consolidated Note, DocMagic's Gap Note and Consolidated Note will default with the same repayment terms. In other words, if, for example, NY3233C.NOT selects, and there is a GAP loan, NY3233.NOT-cema will return in the CEMA package.

4. If new funds are advanced at the time of the consolidation and modification evidenced by the CEMA, the new money mortgage (the "Gap" Mortgage) will also dynamically return in the loan package in addition to the Gap Note. The word "Gap" appears in the title of these Gap Mortgages.

a. The dollar amount entered in the second blank in Section I of the CEMA and the dollar amount entered in the corresponding blank on the Gap Mortgage must be the same. If no new funds are advanced at the time of the consolidation and modification, then the second blank in Section I of the CEMA should be $0.00. This new loan will then become a part of the Consolidated Note and the Consolidated Mortgage.

A Notice of Right to Cancel (H-9) (NORTCI.MSC) will return in the CEMA package if there is a "Gap" loan; otherwise, the Notice of Right to Cancel (H-8) (NORTC.MSC) must be used.

Although fixed rate CEMA programs are now available, DocMagic can create an adjustable rate package (FHA and/or conventional) upon customer request.

If you have any questions concerning the subject matter of this article, please contact DocMagic's Compliance Department.