Could Fracking Put You In Foreclosure?

As the Ohio legislature proclaims the economic benefits of fracking for those in Eastern Ohio a major concern to home owners has been exposed in a recent article published on EcoWatch.org.

Home Owner Gas Drilling Leases: Boon or Bust” by Elisabeth N. Radow was published on March 7, 2012, and highlights the extreme negative side effects that are possible from entering into a gas lease. It is important to remember that EcoWatch is (obviously) focused on stopping fracking and the article may not provide a completely balanced argument, however I believe it does offer some interesting talking points.

[media-credit name=”P.J. Rays | Flickr” align=”alignright” width=”453″]Fracking Effect on your Mortgage[/media-credit]
How does fracking effect your mortgage or your ability to get a mortgage on your home?

Can A Gas Lease Put My Home Into Foreclosure?

Technically? Yes. The standard mortgage states that the home owner is to not deface the property in a way that would include creating hazardous wastes on it. However, will it actually cause you to lose your home? Honestly, I have a hard time seeing banks that are overwhelmed with foreclosure cases beginning to foreclose on properties that are current on mortgage payments because of gas rights.

My caution, would be though that we know the banks are greedy and a bank is more likely to foreclose if there is money to be made on selling the home — and gas rights make it very easy to make money on that city. So if you got gas rights, be careful as you might be on a foreclosure hit list from the bank.

Can I Get A New Mortgage on My Home With Gas Rights (Or a New Owner Get a Loan)?

Right this moment … the answer is rather hard to say. Based upon the reaction from the New York Times “Drilling Down Series” it appears the government is suspending FHA financing on homes that have gas line leases involved in the deal under NEPA until fracking’s effects are better understood. Which traditionally would leave the conventional market ready and willing to take on these folks … but … well … the conventional market has yet to fully recover from the housing melt-down. That limited recovery has placed a conventional sector that is still heavily reliant upon its loans being FHAish enough that if the loans had to be sold the FHA market becomes an option.

Which leaves those with gas line leases sitting on the outside looking in. Now don’t fear, there is a guarantee that before too long someone will fill the gap — that’s the American way — however those with gas line leases will pay more for the right to use those services.

So Should I Sign a Gas Lease?

That’s 100% up to you! However, I’d make sure to talk to your attorney to make sure you are covering your basis and dotting all the “i” and crossing all the “t”.

There are challenges with fracking, but they can be overcome with time, research and discovery. The key is too make sure you aren’t on the wrong side of the research when it all fracks out.

Photo Courtesy of P.J. Ray and Flickr

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