Trinity Place Holdings Inc (TPHS)

[Enterprising Investor]

Value creation can now begin.

The critical part of making this happen was one sentence contained in Item 3 of the Preliminary Statement:

In connection therewith, the parties request, out of an abundance of caution, that the Court confirm that the mortgage and/or sale or other transaction regarding the Trinity Property (i) are approved by the Court and (ii) will not be subject to any recording, transfer, stamp, or similar tax.

New York State imposes a tax on the privilege of recording a mortgage on real property located within the state. In addition, New York City, Yonkers, and various counties impose local taxes on mortgages that are recorded in those jurisdictions.

Tax rates

The following tax rates apply:

•basic tax of 50 cents per $100 of mortgage debt or obligation secured.

•special additional tax of 25 cents per $100 of mortgage debt or obligation secured.

•an additional tax of 25 cents per $100 of the mortgage debt or obligation secured (30 cents per $100 for counties within the Metropolitan Commuter Transportation District). The recording of a mortgage is subject to the additional tax, unless the additional tax has been suspended in the county where the real
property is located. If the real property is principally improved or to be improved by a one- or two- family residence or dwelling, the first $10,000 of principal debt or obligation secured by the mortgage is deducted in computing the additional tax.

•city or county mortgage tax of 25 to 50 cents per $100 of mortgage debt or obligation secured, where applicable.

Based on my almost ten years in the residential mortgage business, needless to say, it can be very expensive to refinance property in New York. However, there is solution - the Consolidation Extension and Modification Agreement. The CEMA modifies the terms of a mortgage recorded against a property and under certain circumstances merges it with another mortgage recorded against the same property to form a single consolidated mortgage to secure a loan. This can be utilized when refinancing a mortgage or under certain circumstances when purchasing a house, townhouse, commercial building or condominium unit.

The CEMA combines the unpaid principal balance of a mortgage loan recorded against a property (commonly called “Old Money”) by assignment with a new money mortgage and note representing any additional loan proceeds advanced by a lender (commonly called “New Money”) to form a consolidated mortgage and note equaling the total combined amount being loaned by a lender.

Example: As for an example for a total loan amount of $200,000, the unpaid principal balance of an existing recorded mortgage held by Lender “X” in the amount of $125,000 (Old Money) is assigned (with its note) to Lender “Y”. The borrower will execute a mortgage and note to Lender “Y” representing the additional money advanced in the amount of $75,000 (New Money). Both sets of notes and mortgages ($125,000 and $75,000) are consolidated under the CEMA to form a consolidated mortgage and note to Lender “Y” totaling $200,000. The borrower will pay the mortgage recording tax on the New Money but will be exempt from paying the mortgage recording tax previously paid as a result of the recording of the Old Money Mortgage.

The CEMA process is time consuming and not cheap. Fees are charged by the other lenders in exchange of providing the assignment. Banks will also charge document preparation, processing and legal fees when attempting a CEMA loan transaction. Lawyers are normally involved, which drives up the closing costs.

Thanks to the Court, this and other tax issues are gone.