Oil & Gas Lease Impact on Refinancing

On Monday, September 3, 2012 0 comments

One Pennsylvania homeowner was looking to refinance his home, located just 30 miles north of Pittsburgh, PA but he met a roadblock. It wasn't his credit score, it wasn't his job, it wasn't the appraisal value of the home... they were good. So, what was it, you ask? 

It was the oil and gas lease he signed allowing a company to drill for gas beneath his property that was raising a red flag to the bank. You see, each bank has different guidelines regarding financing properties with active oil and gas leases.  Oil and gas leases represent an "interest" in the property and depending how the lease is written, financial instituations may request that they be re-written to protect the "banks interests" first.

The Pennsylvania homeowner was lucky enough to be able to go back to the oil and gas company, who agreed to put the bank's interests first... but this it not always the case.  Some banks are not willing to refinance ANY homes with oil and gas leases on the property while others have strict guidelines that must be met to qualify for financing.

Banks are taking a new look at both the positive and negative impacts of oil and gas leases and drilling. Experts say, banks are just not sure how to assess the impacts of the Marcellus Boom relative to lending.

In the past -- lending institutions never even asked about oil and gas leases, but that has since changed. More than 350,000 oil and gas wells have been drilled since 1859.


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