The Quick Read: A New York co-op has no recorded mortgage, so there is no mortgage recording tax for a CEMA to reduce. Going without a CEMA is the normal co-op case, not a missed saving. The larger question is whether a VA cash-out can be done on a co-op at all. VA treats cooperative loans as a special category that needs prior approval, and that gate comes before any cost discussion.
What Does “Without a CEMA” Actually Mean on a Co-Op?
It means nothing is lost. A CEMA (Consolidation, Extension and Modification Agreement) is a New York tool that lets a refinance carry over an existing recorded mortgage, so recording tax is due only on the new money. It works only when a mortgage on real property exists and the old lender cooperates by assigning it.
A co-op owner does not hold real property in the usual sense. The owner holds shares in a corporation and a proprietary lease. The loan is secured by those shares and the lease assignment. Nothing gets recorded as a mortgage in the county real-property records, so there is nothing to consolidate.
Say a borrower is told, “You can’t do a CEMA on your co-op.” That is accurate, and it should not read as a cost problem. The same borrower on a condo or a house could use a CEMA only if the old lender agrees to assign the existing mortgage.
Is a VA Cash-Out on a Co-Op Available at All?
Not as a routine product. This is the part most articles skip. VA’s regulation on cooperative loans requires prior approval for certain loans, including loans on units where title is not held directly by the veteran. It also lets VA attach conditions that protect the Government as guarantor and protect each veteran’s equity if other participants default.
In practice, that means a co-op VA file is decided case by case. Across the wholesale programs Lendmire places VA files with, a co-op is not treated like a standard condo or single-family file. Some lenders will not take it. Some buildings cannot qualify. Board restrictions and rights of first refusal can disqualify a building under VA’s rules.
A VA cash-out is also a loan on a home you live in. VA’s cash-out page says you need a Certificate of Eligibility (COE), must meet VA and lender standards for credit and income, and must live in the home you are refinancing. If the building or the lender cannot clear the co-op path, the usual fallback is a non-VA co-op loan. That gives up VA-specific benefits such as the guaranty.
If you want the basics of the program first, Lendmire’s VA cash-out refinance program page covers how the loan reaches 100% of appraised value and refinances any loan type into VA.
Key Terms Defined
CEMA: An agreement that assigns and consolidates an old recorded mortgage with a new one, so tax applies only to the new money.
Mortgage recording tax: A New York tax on mortgages recorded against real property.
Proprietary lease: The lease that gives a co-op shareholder the right to occupy a unit.
UCC-1 financing statement: A filing that perfects a lender’s security interest in personal property, such as co-op shares.
Notice of Value (NOV): VA’s appraisal result, which sets the reasonable value of the home.
Certificate of Eligibility (COE): The VA document that confirms you qualify for the benefit.
What Do You Pay Instead of Recording Tax?
Different costs, not zero costs. “Co-ops have no closing costs” is a misconception. The recording tax is avoided, but co-op files carry their own charges.
The lender takes a security interest in the shares and the assignment of the proprietary lease. That interest is perfected with a UCC-1 filing rather than a mortgage recording. Beyond that, expect items tied to the co-op structure: lien searches, attorney work, and documents from the building, such as a recognition agreement signed by the corporation. Boards and managing agents often charge for their part of the package.
Dollar amounts for these items vary by building and lender, so they are not listed here. The Loan Estimate is where you see the actual lines. A New York real-estate attorney or title company should confirm how your building’s filings work.
Where Recording Sits Among VA Cash-Out Costs
VA’s own rules decide which charges a veteran can be billed. The figures that apply to a VA cash-out are these:
| Item | How it works on a VA cash-out |
|---|---|
| Funding fee | 2.15% first use, 3.3% after; reviewable |
| Funding fee exempt? | Waived for veterans with service-connected disability compensation and other exempt groups |
| Loan ceiling | Up to 100% of appraised value, including the financed fee |
| Mortgage insurance | None |
| Recording tax on a co-op | None, because no mortgage is recorded |
| Co-op filing and building items | Vary by building; see the Loan Estimate |
Those fee tiers are subject to lender guidelines and full file review. The funding fee can be rolled into the loan, but it still counts against the 100% ceiling.
Co-Op, Condo With a CEMA, Condo Without One
The same VA cash-out looks different depending on the property. This table is illustrative, not a quote.
| Property | Recorded mortgage? | CEMA possible? | Recording-tax effect |
|---|---|---|---|
| Co-op | No (shares and lease) | No | None to pay, none to reduce |
| Condo or house, CEMA | Yes | Only with old-lender cooperation | Tax on new money only |
| Condo or house, no CEMA | Yes | Not used | Tax applies to the new mortgage |
One trap sits in the CEMA row. If the old mortgage is discharged of record before the new one is recorded, New York treats the new mortgage as new and taxes it in full. That is a sequencing issue on real-property files. It has no bearing on a co-op.
How the Loan Is Underwritten, Step by Step
On a co-op, the order matters, and the property gate comes first.
1. Confirm the property can be financed with VA at all. For a co-op, prior approval under VA’s cooperative rule, or a referral to VA’s central office, comes before the appraisal and underwriting.
2. Confirm your eligibility. That means the COE, occupancy, credit and income. VA sets no minimum credit score. The wholesale programs Lendmire places VA loans with start at a 580 decision score, subject to lender guidelines.
3. Order the VA appraisal. Under the Lender’s Handbook text, a Notice of Value is not issued on a cooperative plan of ownership until VA gives processing instructions. Because that wording may have changed, check the current version on VA’s Lender’s Handbook page.
4. Sort out the collateral. Shares and lease assignment, perfected by a UCC-1. No county mortgage recording.
5. Run the residual income test. Residual income is the controlling test on VA files. The 41% debt-to-income figure is a guideline, not a cap. A ratio above it needs residual income well above the table.
6. Close within VA’s rules. The funding fee and allowable charges are checked against the 100% ceiling. Seasoning applies as well: it covers all cash-outs that exceed the old payoff, and cash-outs that refinance an existing VA loan.
Under the same rules, VA requires a refinance disclosure that compares the new loan amount to the payoff and estimates the equity being removed.
Where the General Rule Breaks
A few edge cases change the picture.
Non-VA loan into VA. A cash-out can refinance any loan type into VA. The IRRRL, VA’s streamline, cannot. It is VA-to-VA only and does not provide cash out.
Type I and Type II. VA’s circular defines a Type I cash-out as a loan, fee included, that does not exceed the payoff. A Type II exceeds it. The two types carry different seasoning and recoupment treatment.
Joint loans. A non-spouse co-borrower triggers prior approval and a limited guaranty under VA’s cooperative rule.
Building risk. A co-op usually carries a blanket mortgage on the whole building. VA’s concern, described in a document on the Senate Veterans’ Affairs Committee site, is that a foreclosure of that mortgage could wipe out individual shareholders’ interests. The same document says a right of first refusal alone would disqualify most projects. It is undated, so treat it as context.
Reading Your Loan Estimate
On a co-op file, check for these lines and these gaps.
- Should appear: funding fee (unless exempt), appraisal, title or settlement charges, UCC filing, building or managing-agent items.
- Should not appear: a mortgage recording tax line, or a CEMA assignment fee.
- Red flag: a lender quoting you either one. It signals the file was treated like a condo.
- Ask: whether the building has been cleared for VA, and who at the lender handles co-op files.
How This Affects Your Budget and Equity
The co-op’s recording-tax exemption is a real difference from a condo or house. But a VA co-op path may need special approval, and the funding fee and allowable closing costs still apply. The fee can be financed, so it adds to the balance.
Co-op maintenance charges include the building’s underlying mortgage and taxes. They sit outside your VA loan payment, so budget for them separately. Cash-out also removes equity, which is why VA requires the disclosure. Tax treatment of cash-out proceeds can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Frequently Asked Questions
Can I use a CEMA on a co-op refinance?
No. A CEMA consolidates recorded mortgages, and a co-op loan is secured by shares and a proprietary lease. With no recorded mortgage, there is nothing to assign or consolidate.
Do I pay mortgage recording tax on a New York co-op?
Generally no. New York’s tax applies to mortgages on real property, and co-op share loans are not recorded that way. Other co-op filing and building costs still apply, and a New York attorney or title company should confirm your building’s details.
Is a VA cash-out available on a co-op?
Only case by case. VA’s cooperative rule requires prior approval, and many buildings or lenders will not clear it. Eligibility, appraisal and underwriting all follow the same VA standards, subject to lender guidelines and full file review.
Can a VA streamline pull cash out of my co-op?
No. The IRRRL is VA-to-VA and does not provide cash out. A cash-out refinance is the VA product that can refinance any loan type and reach 100% of appraised value.
What if my co-op can’t get VA approval?
The usual alternative is a non-VA co-op loan. You give up VA-specific benefits such as the guaranty, so compare the programs and the equity each one reaches before deciding.
Next Step
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. Nothing here is a commitment to lend, and every program figure is subject to lender guidelines and full file review.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. eCFR, 38 CFR 36.4346 Cooperative loans
2. VA.gov, Cash-out refinance loan
3. NY Division of Tax Appeals, Determination 821253
4. VA’s Lender’s Handbook page
6. Senate Veterans’ Affairs Committee document on VA and co-ops
This article is part of Lendmire’s VA Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: VA Cash-Out vs Conventional for a Veteran Wanting the Most Cash · Does the Lender Matter for a VA Cash-Out on an Existing VA Loan? · VA Cash-Out vs Conventional Cash-Out When the Home Is Worth Far More
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.