Hinchey asks for information on drilling and mortgages
October 26, 2011 —
Congressman Maurice Hinchey has written to the Federal Housing Finance Agency (FHFA) and the New York State Department of Environmental Conservation (DEC) asking that they examine mortgage rules as they relate to gas drilling and the signing of gas leases.
The request came after a story in The New York Times reported that banks and real estate executives, especially in New York, are refusing to offer mortgages on properties that have gas leases attached to them. The report, published on October 19, said at least eight banks are now following this policy.
The report also said that in some cases gas leases may violate mortgage rules, which might render them unsuitable for sale to organizations like Fannie Mae, Freddie Mac and Ginnie Mae, which buy the overwhelming majority of residential mortgages in the United States in the secondary market.
Hinchey wrote in a press release, “The rush to drill has created a state of confusion over the mortgage rules governing gas drilling leases, and now homeowners who have signed leases may find themselves in technical default of their mortgages, making it difficult to refinance or sell their property.”
According to a report by the Congressional Research Service, Fannie Mae and Freddie Mac require prior approval from a lending institution before a landowner can sign a lease to allow gas drilling on their property. But, the Times report said some drilling companies tell homeowners to get approval from the mortgage holder before drilling begins, but not before signing a lease.
Hinchey said, “Many homeowners who signed leases now have questions about their mortgages and their ability to refinance or resell their homes, because important information was not brought to their attention by drilling companies pushing for them to lease their land. To help sort out this problem, I’ve sent letters to federal and state regulators asking for a clarification of the mortgage rules, an examination of leases that have already been signed to determine the extent of violations that may have occurred, and new guidelines to help homeowners and local banks protect their own financial interests. Regardless of where everyone stands on this issue, we can all agree that this problem needs to be dealt with to protect homeowners and local banks.”