CEMA, rates and bank closing costs

The fact that a CEMA is utilized, either in a refi or a purchase, can have an effect on the interest rate or other bank closing costs. In a residential transaction, the lender pays .25% of the mortgage recording tax. On a loan of $400,000.00, the bank has to shell out $1,000.00 which they would save on if the prior lender assigned its mortgage to your lender. Because the loan costs the bank that much less to close, they are making more money on it. This is one of the many factors that go into the bank's formula when figuring out the rate and costs to charge a borrower. Of course, they are not going to tell you this so it is your duty to bring it up.

I would tell the bank to reduce the rate slightly and once you are rebuffed (most likely) tell them to waive the application fee or processing fee. Explain to them that by doing the deal as a CEMA, they are saving on the mortgage tax that the lender pays so in essence, you are helping them out. Just my opinion, but I am pretty confident that they will waive something to make you happy and close a deal.