independent landman question

independent landman inquiring with a paper to contact mortgage holder and needs permission to speak with them regarding in case property would go into foreclosure......is this legit?  also left me with a consent to lease and assignment of royalties ....with the Mortgage Electronic Registration Systems, INc as nominee for my mortgage company, consent to the following gas and oil lease.states in paragraph pursuant to a mortgage from me to mortgage electronic registration systems inc as a nominee for my bank dated with my original mortgage date .  the mortgagee3 agrees to provide Lessee with resonable advance written notice of the date of payments to it and are to begin and to which the payments are to be mailed.  Is this legit or should i be concerned?  a penny for your thoughts.

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Permalink Reply by Chris on April 28, 2015 at 6:03pm

yeah its legit. pretty much all land men are independent. These subordinations happen anytime there is an active mortgage.

Permalink Reply by Glenda Klempay on April 28, 2015 at 6:12pm

should i have an attorney look over agreement stating them as nominee?  Probably would feel better to have someone with more knowledge than me give it a read. thanks.

Permalink Reply by Chris on April 29, 2015 at 9:05am

MERS is already the nominee.  This is an agreement between the Mortgagee and Lessee,  the consent is just saying that that its ok for the lessee and mortgagee procure this agreement. This is not a contract.  By all means have someone look this over if you don't feel comfortable, but if they charge you for more than 10 minutes of time than they are ripping you off.

Permalink Reply by Tim Tarr on April 29, 2015 at 2:38am

Here's my $0.02 worth.

How much land are we talking about?

I don't trust anything "they" want you to sign ! Unless you completely understand what your signing get legal advice. If they want you to sign something make them reimburse for legal fee's. 

Permalink Reply by Shon Lenzo on April 29, 2015 at 7:05am

don't sign anything if you don't understand it, especially in this business.

One thing I learned from dealings with Columbia Gas is that no matter what was signed before,

or you were promised it is what was  signed last that really counts.

It can can negate everything signed before.

Permalink Reply by Glenda Klempay on April 29, 2015 at 10:42am

thank you.  I am seeking an attorney after reading about lawsuits involving this nominee company, 

Permalink Reply by Shon Lenzo on April 29, 2015 at 11:04am

I feel the pain paying the lawyer...

but it can be a lot more expensive not to pay them,

and can end up costing a lot more!!

Permalink Reply by NY Shale Gas Now on April 29, 2015 at 1:25pm

In a nutshell, you can wrap your head around this fairly common situation by considering this sequence:

1) Landowner buys land with oil and gas included, often with the help of a bank -- either right at the point in time of purchase, or down the road on a re-finance. (Or, down the road, landowner temporarily liquifies part of a "free and clear" asset with a home equity line of credit.)  Either way, you can see that first rights to the land as collateral have been already spoken for.

2) Later on, however, landowner signs an oil and gas lease on the same land, but the work of asking the bank to bless the deal has been put off until later.  (If the landowner was doing something like splitting off a house lot, surely no prudent buyer would buy without the controlling bank first saying okay, in documentary form.)

3) So the status quo so far is, in the unfortunate event of the bank's future need to foreclose on its the "first in line" lien, any burdens the landowner had independently permitted afterwards are legally capable of getting "cut off" by a judge in foreclosure.  This is generally true of second mortgages, money judgments, leases, etc. (though, through special state legislation, plain vanilla utility easements typically get a pass in jurisdictions I have experienced).

4) The driller would be imprudent in expending money, time, and effort to drill on or unitize tracts where the strength of its underlying leasehold could at any future point in time be wiped out by such a foreclosure.

5) So the driller is going through the paperwork gyrations necessary to ask the bank, before development, to agree that any possible future foreclosure will -- in the interests of generating value for all concerned -- leave the leasehold still standing.

All in all, what you're describing is a good sign that something might be finally happening.

Permalink Reply by Shon Lenzo on April 29, 2015 at 8:07pm

but get a lawyer anyway.

Permalink Reply by Mark Anders on May 4, 2015 at 2:35pm

I've been a Landman for the past 5 years and have done many subornations. This is common in the Oil and Gas industry and getting a lawyer would be a waste of money for you. I'd say that you can let the Mortgage Lien holder or whomever gave you the loan on your house review it. Chances are the bank has already done them in the past and they are familiar with it. It will speed up the process for you as well.

To give you an idea of what this is: You eventually will receive a royalty. This subornation protects the bank in the event that you default or miss multiple payments. Think of it like this. You miss 3 payments on your loan but yet you still continue to get a royalty check. That's not fair to the bank.

Good luck and feel free to ask me any questions. I'm no longer in the Ohio area so I have no conflicts of interest in giving out any info that any landowner seeks! 

Permalink Reply by dustin l larson on May 4, 2015 at 3:14pm

mark anders do you think they are going to drill all this property the oil companies have leased up in southeastern ohio ? or is some not going to get released ?

Permalink Reply by Mark Anders on May 4, 2015 at 3:22pm

It's tough to answer that question because I'm only familiar with 2 companies and their intentions. 

I can say that the prices of Oil and Gas have a HUGE impact on how fast they will get to drilling that area. The best thing you can do is to read the SEC filings or listen to the conference calls and look for the 2015 capital expenditures. IF they are being lowered along with a lower rig count then chances are they are putting it off.

The other thing you can do is to see how well the current drilled wells are producing. If there is a monster well in the area then companies will want to focus on that area...

Another thing to look at is the mix of the well. Is it more Oil, wet liquids, or dry gas and then compare the prices. If Oil prices go up then they will focus on oil rich areas first..

Anyhow, do I think they will drill those areas? Yes, but not anytime soon at these prices. This is a business for them and those companies want to make the money back they spend on leasing that land but in an economical sense OR they will just package the acreage and sell it to another company as a whole to recoup that cost.

Hope that helps!

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