GAS LEASE SIGNED = NO LOANS

IF YOU SIGNED YOUR GAS LEASE, YOU CAN NOT GET A HOME EQUITY LOAN OR BUY A HOUSE WITH THE LEASE SIGNED BY ALMOST ALL BANKS BECAUSE THEY WILL NOT LEND MONEY ON THOSE PROPERTIES. JUST RECENTLY FOUND OUT ABOUT THIS

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Permalink Reply by ulflyer5 on July 23, 2012 at 3:46am

   Money was not an issue. Just wanted a lower rate and consolidate. Currently at 4.8% 1st and 6% second could have lowered to 2,7% or less. Lease is 4yrs old already. I was told Fannie Mae will not buy or back a loan for a property with as gas lease. I could get a loan direct from banks I have excellent credit and plenty of equity  was all approved for the loan till the day before the signing then was told because of the gas lease they could no longer close the loan. This was back last November. I then checked with multiple banks and was told the same. And you are right if I had received $6000/ acre I wouldn't need to consolidate. But I never said I did. I was one of the early ones.     Thanks

Permalink Reply by Lori Weiss on July 23, 2012 at 7:51am

We got our loan to lower our interest rate from 8% to 4%.  Sounds like a pretty good reason to me.  Incidentally, just because someone is getting a home equity loan, that doesn't mean they're spending money they're anticipating.  Some of us had to replace roofs that cost $15,000. and couldn't risk waiting a year or longer to get a royalty check that may or may not ever come.  Some of us received our lease payments four years ago and spent that on other necessary home repairs.  And, trust me, it was a hell of a lot less than $5,000/acre.

Permalink Reply by Mike Knapp on July 23, 2012 at 2:49am

Personally, I wouldn't want to give my business to a bank that is taking a position against oil and gas development.   For anyone here in Western PA, there is Farmers & Merchants Bank of Western PA.  They are one of the larger regional banks, they are family owned, and they are owned by the same company that owns Snyder Brothers Inc., which is the largest independent gas producer in Pennsylvania (they operate somewhere around 3,500 wells).  You won't have any conflicts with them, and they're great people to deal with.

http://www.fmbwpa.com

Permalink Reply by Mike Stevens on July 23, 2012 at 3:03am

Thanks for the info Mike. My residence is in Mercer County, PA and when deciding whether or not to sign a lease I checked with several local lenders regarding the ability to re-finance if I so chose. I have been doing business with these lenders for 25+ years, including two credit unions.  Not one would even entertain the idea of re-financing if there was an O&G lease on the property.

Permalink Reply by ulflyer5 on July 23, 2012 at 3:52am

   Unfortunately I signed very early in the gas boom. Not to get into it but got the same story others have received from the land man. I tried calling lawyers but the PA lawyers didn't really have experience and the out of state lawyers wouldn't comment on PA laws. So it was the sign or get nothing experience. If I knew back then what I know now. LOL 

Permalink Reply by Frank Nesmith on July 23, 2012 at 3:42am

It's not a good attitude to take to bash the banks. They are just doing what they need to do to survive. It's not that they want to limit loans, they have to in order to protect their investments. So be it. You will pay more in interest and you will also need to look at your homeowners insurance. However, if this is a risk you are willing to take for the long term, by all means lease. If you foresee the need for a loan or a limit on who will insure you, don't lease.

It's as simple as that. Not loaning is NOT taking a position, it's just part of their business. The risk is yours. Just weigh it against how certain you are of the reward.

Permalink Reply by ulflyer5 on July 23, 2012 at 3:57am

   Where was the bank bashing? My only question was to find a bank willing to lend. I am in business and have learned a long time ago to take nothing personal. Me being in this position is all my responsibility. No one else.

Permalink Reply by Frank Nesmith on July 23, 2012 at 5:35am

I was referring to Mr. Knapp's response.

Permalink Reply by ulflyer5 on July 23, 2012 at 3:47am

   Thank you for the link. I will look them up. Dave

Permalink Reply by david stover on July 23, 2012 at 7:38am

WE have a lease with Hilcorp. We were talking with or bank about refinancing our loan at a better rate.

we were told that the current mortgage has first lien position and our gas lease has second position. If we were to refinance, the new mortgage would pay off the original mortgage, the gas lease would become the first lien holder and the new mortgage would be in second position which they would not accept (be able to sell on the secondary market)

In order for the bank to agree to this the gas company would have to agree to subordinate its position back to second lien holder. I have been calling Hilcorp, (western land services) for 2 weeks and havent goten a response

2pwt9ru4672sqPermalink Reply by 2pwt9ru4672sq on July 23, 2012 at 9:52am

David,


Whatever financial institution told you that is somebody that you would likely not wish to do business with in the first place.  First of all, in Ohio, thanks to the Super Priority law that is in effect, an oil and gas lease ALWAYS has priority over a mortgage and would not be displaced by virtue of a foreclosure by a lender.  This is true regardless of whether or not the lease predated the existence of the mortgage.  Secondly, an oil and gas company would NEVER be considered a creditor/lender to a property owner UNLESS the oil and gas company paid off your past due mortgage or paid off your past due taxes (providing they have the contractual right to do so by virtue of the lease language).  So there would be very limited circumstances that a mortgage company would need to be concerned with.  If the gas company were to take that action, their only recourse is to recoup any funds they might expend out of your royalty income stream. 

I'd go find yourself a legitimate lender with a higher degree of competence!

1509.31

(D) If a mortgaged property that is being foreclosed is subject to an oil or gas lease, pipeline agreement, or other instrument related to the production or sale of oil or natural gas and the lease, agreement, or other instrument was recorded subsequent to the mortgage, and if the lease, agreement, or other instrument is not in default, the oil or gas lease, pipeline agreement, or other instrument, as applicable, has priority over all other liens, claims, or encumbrances on the property so that the oil or gas lease, pipeline agreement, or other instrument is not terminated or extinguished upon the foreclosure sale of the mortgaged property. If the owner of the mortgaged property was entitled to oil and gas royalties before the foreclosure sale, the oil or gas royalties shall be paid to the purchaser of the foreclosed property.

Permalink Reply by ulflyer5 on July 23, 2012 at 10:03am

  From what I understand its not so much the banks. But Fannie Mae. If I want to get the lower interest that's what it needs to be. Conventional bank MTGs are in the 5 or 6% or higher and it won't do any good. All I wanted to do was take advantage of the lower rates and pay off my MTGS sooner and for less money. I wasn't looking for more money but for less cost of money. My equity is double what I wanted to borrow.   And both my wife and I are over 800 credit. Like I said the issue seems to be with Fannie Mae and gas leases.  So for now I will just keep adding extra to the loans I have and get rid of them that way.

    Thanks

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