Agreements to frack on private property could cause defaults and plummeting home prices.
By Andrew Schenkel
For the more than one million Americans who have been offered cash for the right to hydraulically fracture their property, an investigation by The New York Times outlines their biggest fears: devalued property and potential defaults.
Ian Urbina’s investigation, which went to print on October 20th, points out that deals offered to landowners for drilling rights may be in direct conflict with the mortgage agreements between banks and citizens. According to Urbina’s report, “bankers are concerned because many leases allow drillers to operate in ways that violate rules in landowners’ mortgages.” Banks have traditionally stayed out of the deals made between the gas industry and landowners, which has caused countless families to be living in violation of the terms of their home mortgages without even knowing it. This, needless to say, could cause citizens to contractually default on their loans and for the bank to demand full payment
The recent investigation notes that the technical default situation has not yet occurred on a widespread level, but the fears that the gas industry could be on the cusp of causing another mortgage crisis has created an atmosphere where more red tape would be added to mortgage procedures. From the investigation: “In terms of litigation, there is a real potential for a domino effect here if lenders at each step of the way made guarantees that are invalid,” said Greg May, vice president of residential mortgage lending at Tompkins Trust Company, headquartered in Ithaca.
Another part of the investigation included a presentation given by the Pennsylvania Credit Union Association, which compared getting drilling procedures in line with mortgage regulations to “solving a Rubik’s Cube.” The presentation outlines the basic questions of how this can be done, while minimizing risk for local lenders.
In recent years, landowners in heavily ‘fracked’ parts of the county, like Garfield County Colorado, have seen property values plummet. Retirees, like Dee Hoffmeister and Lisa Bracken, have experienced this first hand. Both of their families have found themselves powerless to pursue any recourse at recovering the damage done to their personal assets.