Mortgage company requires bonus payment be used to retire loan.

The good news is that very soon we will have clear title to our farm here in western PA.

We were fortunate to be signed by a major at the end of last year to a good contract containing the addendums we wanted, and at the dollars and percentage we consider fair. 

We were recently given a date certain for the bonus payment to be deposited in our account and were obviously happy knowing this actually may just happen.

Then we were informed our mortgage company (a farm focused lending company) is demanding the bonus payment be sent to them so that our loan be satisfied first with the remaining amount then sent to us.

There is a clause in the mortgage papers concerning this (which we didn't realize).

We have had the loan for over 12 years and according to them, have an excellent record of payment.

However, my credit rating has been in decline since I lost my job over a year ago. I am 60 years old and have found it impossible to find similar employment due in large part to the economic slowdown. The mortgage company used my credit rating as the reason for their demand.

I realize there is probably nothing I can do regarding this last minute turn of events, and as I said at the top, we will end up with a clear title to our 90 acreas. However, in the short term and given our existing economic condition, the remaining bonus dollars will just cover the federal and property taxes owed.

In other words, nothing left over to bridge the gap from the present to potential future income.

My purpose for posting this is two-fold:

1) Alert anyone in a similar position to get prepared. Our shock would have been mitigated had we known earlier, before we started making arrangements to satisfy mounting financial issues. 

2) Seek insight from the Shale Nation as to how the value of our paid up property can be unlocked so that as we become retired burger flippers, we can still meet our financial obligations. 

Don't get me wrong, we are happy to be in a position to even be discussing this issue. However, the lesson learned is to never count on anything until it is firmly under your control, and even then there could be (and probably will be) unwanted surprises.  

 

 

 

 

         

                

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Permalink Reply by OldFarm on February 22, 2013 at 12:54am

Thank you all for your response.

As I stated we are glad to be at this point and will be able to deal with the situation.

Just be aware and be able to deal with the unknowns that can inevitably come your way.

Getting the drill bit in the ground, the infrastructure in place, NG demand increasing, and royalties coming will leave this episode forgotten ... except for the lesson learned.

I will check out the key points you all listed and post any pertinent updates and again thanks  Shale Nation for your insight.   

 

Permalink Reply by LERRET on February 26, 2013 at 6:42am

Farm Credit - quasi backed banks and Farmer Mac, FSA ,etc. wised up after 1980.

They also retained a bunch of mineral rights under farms that they repossessed... Just FYI

 

I ran into a situation where they owned 80 acres no where near production and was unwilling to sell the mineral so the owner could develop a limestone quarry even though he offered them a surface price for the minerals. The mine was shelved.

Permalink Reply by SmallLandOwner on February 26, 2013 at 2:52pm

Make sure it is REALLY in the contract.

It is entirely expected now days for a bank to manipulate the loan based on credit score. Yes, mafia style banking.

CAUTION FOR EARLY PAYOFF FEES!!!! Now days when a loan gets paid of early they want a "fee" for lost interest (extortion really). Check your actual principal over the last several months to that it is incrementing down uniformly--a difference may mean fees are being added in. Be sure to pay off only the actual principal. They have no right to early  pay off fees when they are demanding payoff. Conflict of interest!!! 

Absolutely no payments going to the bank first "then we will send you what is left". Charge them 10% interest for the entire time from the date the O&G writes the check. Charge it on the full amount. It is your money.

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