Monday, November 16, 2009

Mortgage Company Reconsiders Lending Policies On Gas Leased Properties Update

With all the stories out there about what gas drilling accidents and leaks have done to some property values, this is no surprise. We have posted many articles where land owners are walking away from homes they can't live in anymore because their land and water is so contaminated from gas drilling activity.

Another blog in the area where this story came from reported that a friend went in and applied for a loan on their property and was asked to sign the following......

Visions Federal Credit Union Policy Regarding Oil and Gas Leases
1. If there is an oil and gas lease on your property, Visions Federal Credit Union will not give you a mortgage loan secured by your property.

2. If someone other than you has the oil, gas, or mineral rights to your property, then Visions Federal Credit Union will not give you a mortgage loan secured by your property.

3. If you presently have a mortgage with Visions Federal Credit Union and you subsequently enter into an oil or gas lease after September 14, 2009, then Visions Federal Credit Union may require you to pay the balance of the loan in full pursuant to the terms of your existing note and mortgage. Please note that Visions Federal Credit Union will not sign a subordination agreement or other consent to lease with an oil and gas company.”

Other mortgage companies in New York are worried about property values from gas drilling. They want to change their lending policies and re-mortgage some properties where the borrowers have signed gas leases.

It is just a matter of time before other mortgage companies decide to do the same to protect themselves.
The below paragraphs really grabbed my attention.

Potential environmental damage to properties could affect their future value, Berrish said.

Visions officials have come up with likely mortgage policy changes for borrowers who lease mineral rights to their properties.

Visions may require some of its borrowers to re-mortgage their gas-leased properties, which would entail a new appraisal and closing costs, Berrish said.

That's because gas leasing could lead to gas drilling and a potential de-valuing of property, Berrish said.

It's also because the secondary mortgage market -- federal lenders like Freddie Mac and Sallie Mae -- specify in their mortgage contracts that if a borrower signs or sells a right to a mortgaged property, the mortgage holder can demand immediate payment in full.

1 comment:

Anonymous said...

Great, as if things aren't bad enough for those of us living near gas drilling.