Anyone have a mortgage denied after signing gas lease?

We signed a lease couple of years ago for our 5 acres of land,   Now trying to remortgage our home and was denied by Citizens Bank who hold our equity loan on home.,   We were told that their underwriting dept. requires that we terminate our lease with Range Resources to get the mortgage.  Are they crazy!  Has

anyone else heard of this or had problems acquiring a mortgage.   Thanks for any responses

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Permalink Reply by frank sparacino on December 7, 2012 at 5:03pm

yes, this is on mind also as i going to refi. SOME LEASES re: pipelines MAY include that "if the homeowner is harmed in any way… re: increased taxes, or losing clean +green, etc. the co. will pay that cost."

pretty sure mine does include that verbiage. i'm going to have to look.

re: the gas lease, i'm not sure. we aren't that close to the wells around us and we've rec'd no notice of royalties re: a unit; yet even tho some drilling has occurred near us. but there r no pipelines yet either, so, don't know if they r paying (or extracting) since there's nowhere for the gas to flow.

i don't know wether to tell the bank upfront or see what they find? using a smaller Allentown bank.

is anything on leases on our titles? anyone know?

ps: FYI: the smaller bank we hope to use has us at lower rates (so far) than 'big' banks. AND have less fees. Quicken wanted like $8,800 in fees!, etc. this banks TOTAL fees will be $2,500 or less, and a lower rate.

Permalink Reply by Terri Katora on December 7, 2012 at 6:04pm

My mother leased her land in 2011 and the landman made no mention of difficulty selling her home as a result of her having a gas lease. She passed away this year and we are experiencing a nightmare trying to sell her house. We have a buyer with excellent credit who has been turned away by 3 lenders as a result of the gas lease, including Huntington Bank which is currently NOT taking applications for homes with gas leases. If they go to a smaller bank they will have to make a substantially higher down payment as well as a higher interest rate. All of the lenders are giving the same explanation, that guidelines through the FHA need to be clarified before they will proceed.

Permalink Reply by Donald on December 7, 2012 at 11:41pm

Something seems wrong with this pictuer, ohio has a forced polling law that lets the G/O company take your minerals without you sighing a lease, yet the banks don't want to lend on a leased property?

Permalink Reply by Mike Coles on December 10, 2012 at 10:30am

Donald,

The 'something wrong' your refering to in New York is called Compulsory Integration.  Pennsylvanis has the same thing under another name.  As related to getting a mortgage, this is a BIG question under the law of 'unintended consequences'.  If a property owner is included in a spacing unit due to some form of 'compulsory integration' (give it your own name depending on what state you live in), and can't get a mortgage, how does the property owner resolve the issue.  The easy answer is your in a well spacing.  You will be getting royalty payments, what's the problem?  Well..................

What if the well is 'shutin' for any reason? (and there can be many) 

What if the prior owner kept the mineral rights?

What if you have 1 acre in a 640 acre unit?(that's 0.0015%, small royalty check most likely)

These are just some of the questions.

Permalink Reply by Kathleen on December 11, 2012 at 8:47pm
Hi,

Just incase someone comes along and just reads this thread I would hate them to read this and think the O/G co. can just do that. They cannot just force pool you, they have so many steps to jump and people to convince before its allowed. It is allowed though like you said but its not the same as a utility.
I can't get the link to work. Anyone interested please just search, Ohio MANDATORY POOLING PROCEDURAL OUTLINE
Permalink Reply by Mike Coles on December 10, 2012 at 10:07am

Terri,

Basicly, the FHA guidlines are suppose to be nearly the same as Fannie & Freddie.  Not taking any applications with 'oil & gas' leases could be a stall tactic by the bank while they figure out what to do.  The same is true for FHA guidelines clarification.  However, your not alone, I was recently in contact with a senior bank officer trying to sell an inheritited property with the same story. 

Permalink Reply by Justmeinpa on December 11, 2012 at 2:38pm

We had the same thing happen to us by a large national mortgage company/bank.  We spoke to several local banks and they all said that they would be happy to give us a home equity loan/line of credit, but will not refinance with a lease.  It's all of them, so you can't rely on local banks to help out even with perfect credit, equity in the home and also receiving royalties.

Permalink Reply by Terri Katora on December 11, 2012 at 4:35pm

Does anyone know if there is any action with our state government regarding this issue? Maybe it's time to start complaining? When I spoke with the gas company, XTO, the lease representative seemed surprised and told me they've never ran into this issue. After research I see it's been going on for a long time. I feel like my 76 year old mother was not well informed before they had her sign the lease. I'd be happy if people who are just leasing their land had full disclosure from the gas companies before they commit. Especially those with a smaller acreage like my mom(20 acres). It's not like she was going to become a millionaire like others who have several hundred acres.

Permalink Reply by Mike Coles on December 12, 2012 at 9:36am

Terri,

This is a standard answer from leasing companies.  A few years ago the subordination agreement on a small acreage surrounding the house was common.  Now I have banks tell me that getting these agreement is difficult to impossible.  I have spoken to banks in western PA and NY where oil & gas leases have been inplace for many years.  Their answer struck me as strange.  They were unaware of any conflicts between the leases and getting a mortgage.  I asked further how they addressed the issue on properties that had an old gas lease or the mineral rights had been retained by a prior owner many years ago.  Their answer was the issue not addressed.  The existence of a gas lease was not mentioned in the appraisal.  If the existence of a gas lease was in the abstract it did not affect the title insurance.  That was then, this is now, and the issue is in the forefront at every aspect of getting a mortgage.  

Permalink Reply by Jackie Casselbury on December 12, 2012 at 4:29am

Don't always blame the bank.  I have talked to my credit union about just this.  They would love to help me but cannot because they need a signed subordination agreement with the driller.  Although some drillers demand one from us, the land owner, the drillers refuse to give them to the banks.  Some banks cannot do anything with out them.  It s another case of do as I say not as I do.  I am sorry for you, try another bank.

Permalink Reply by John Stanton III on December 12, 2012 at 6:10am

Find another Bank!!!  Try Northwest Savings Bank headquartered in Warren, PA

Permalink Reply by Kathleen on December 12, 2012 at 10:09am
I think this movie that's coming out "The promised Land" will cause this to get worse before it gets better.
In time when no big problems happen like the shallow wells they will go back to the old thinking of a lease didn't effect the mortgage at all, but it won't be tomorrow!

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