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PITTSBURGH - When Donald Yost tried to refinance his mortgage about 30 miles north of Pittsburgh in January, he met a roadblock. It wasn't his credit score - he had a solid rating. Or the appraisal he'd paid almost $500 for - that was good, too.

Instead, it was the lease he has that allows a company to drill for gas about a mile under his property, similar to leases many of his neighbors have.

Yost said that in the middle of the application process, ESB Bank told him the gas lease was too prohibitive. So he went to the drilling company, Rex Energy, which agreed to subordinate its claims to the property - in other words, to put the bank's interest first.

"They were actually very good," Yost said of Rex.

But Yost said a bank representative then told him no loans would be given to anyone with a gas-drilling lease. And that's what upsets Yost the most, he said: that the bank didn't tell him upfront that houses with leases didn't qualify. He said it also declined to refund what he'd paid for his appraisal.
Bankers in Pa. assess impact of natural gas
 

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As always, with Sig, the rest of the story..

Eventually, Yost did get his mortgage refinanced with another bank,
"Most banks are trying to court landowners who have oil and gas rights," Moran said, adding that there are a lot of rumors about problems with mortgages and gas leases, but little hard data to suggest it's a significant problem.
When I started looking for this mortgage there were 300 banks that wanted to give me money, after I told them the size of the property and that I was going modular, there were 2, and NONE of those refi commercials apply to me.
He probably should have asked up front, not the banks fault or problem.
 

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Discussion Starter #4
Yup...read the whole article....guy got financing at another bank.

Kind of stinks the guy is out the fee, but good info for lease folks looking to refinance. Might help folks ask the question of the bank.
 

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In an area where leasing is prevalent and someoone is trying to re-fi or get a new mortgage on a house that has leasable land, I think a bank should ask as part of the application process. They ask lots of other questions so ask one more. Yes, I have been through this process recently and couldn't get a re-fi from a credit union a couple years ago, but am successfully completing the process today. With a 10 year, 0 point, fixed rate of 2.5% how can I go wrong? Oh, I'm no longer leased.
 

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In Bradford County....the most drilled County in this state for Marcellus Gas.....There is not a issue getting a loan. My son , who is buying his first home, just got his loan approved with no hassle about gas rights.
It is 11 acres of land...that is leased...Local bank doing all the paper work, bank from North Dakota doing the final FHA loan......no issue at all with gas rights.

Gas right leasing is done in a lot of states....this is not new. To insinuate that one can not get a loan or re-fi due to that......is fear mongering......kinda like a democrat....
 

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HomeintheWoods said:
In an area where leasing is prevalent and someoone is trying to re-fi or get a new mortgage on a house that has leasable land, I think a bank should ask as part of the application process.
Check your application. Bet there was a place for leins, leases, encumbrances, and disclosure. If he disclosed that information to the bank, and they turned him down AFTER he spent money with them, it is time for a trip to the magistrate. If he didn't, which is my guess, then he eats the 500.
 

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buzz said:
It is 11 acres of land...that is leased...Local bank doing all the paper work, bank from North Dakota doing the final FHA loan......no issue at all with gas rights.

Gas right leasing is done in a lot of states....this is not new. To insinuate that one can not get a loan or re-fi due to that......is fear mongering......kinda like a democrat....
So, I suppose HUD is fear mongering???
HUD, (in its Handbook, 4150.2, page 2.7) puts it this way.

Operating and abandoned oil and gas wells pose potential hazards to housing, including potential fire, explosion, spray and other pollution.
No existing dwelling may be located closer than 300 feet from an active or planned drilling site. Note that this implies to the site boundary, not to the actual well site.
The appraiser must examine the site for the existence of or any readily observable evidence of a well.

The fact is many larger banks will not finance to gas leased lands, some will. It does not appear to be as much of an issue with smaller, local banks, despite it being in direct contrast of HUD's policies.
 

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uh...if the residence is more than 300 ft it appears that it would conform to HUD policy... even with your interpretation of what HUD implies
 

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timberdoodle said:
uh...if the residence is more than 300 ft it appears that it would conform to HUD policy... even with your interpretation of what HUD implies
My interpretation? You assume too much. That's a direct quote from the Hud handbook. (including the site boundary, not well site clarification)
 

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And the HUD guidance says it should be considered in the appraisal. The appraisal Should consider anything and everything that will impact value. Seems reasonable to me that a well, or pipeline, within 300 feet of a residence may reduce the pool of potential buyers. Which may, in turn, reduce the price paid. Emphasis on MAY, cause it may not. That's the job of an appriaser to determine based on what has happened with similar houses that recent;ly sold.
 

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HomeintheWoods said:
And the HUD guidance says it should be considered in the appraisal. The appraisal Should consider anything and everything that will impact value. Seems reasonable to me that a well, or pipeline, within 300 feet of a residence may reduce the pool of potential buyers. Which may, in turn, reduce the price paid. Emphasis on MAY, cause it may not. That's the job of an appriaser to determine based on what has happened with similar houses that recent;ly sold.
Actually what is says is:
If the condition is clearly a health and safety violation, reject the appraisal and return it to the lender.

Operating and abandoned oil and gas wells pose potential hazards to housing, including potential fire, explosion, spray and other pollution.

No existing dwelling may be located closer than 300 feet from an active or planned drilling site. note that this applies to the site boundary, not to the actual well site.

the above from the HUD Handbook Chapter 2 PDF located at: http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4150.2/41502c2HSGH.pdf
 

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However, back to the OP's statement, your HUD quote, says NOTHING about a lease.

It does take into account a "condition that is a CLEAR health and saftey violation" as being a reason to reject, not having a lease.

Oh, BTW, having dealt with HUD, yes they are fearmongers, or at best nanny staters that are in love with red tape.
 

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For several reasons, none good, I've had the opportunity to get several appraisals as required to re-finance:
2007 - $100,000
2010 - $170,000
2012 - $265,000
I've changed the numbers but kept the rate of appreciation correct for illustrative purposes. The actual numbers aren't required to deliver the message. As you can see Marcellus Shale development has caused real estate values to plummet.
 

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Shhh, hes a Democrat, requires standing on your head and telling the world it is upside down..
 

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Discussion Starter #17
HomeintheWoods said:
For several reasons, none good, I've had the opportunity to get several appraisals as required to re-finance:
2007 - $100,000
2010 - $170,000
2012 - $265,000
I've changed the numbers but kept the rate of appreciation correct for illustrative purposes. The actual numbers aren't required to deliver the message. As you can see Marcellus Shale development has caused real estate values to plummet.
Sounds like you folks up that way are ready for a re-assessment on property tax.
 

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First of all, my land is in clean and green and that assessment is set at the state level. The value of the house would probably remain fairly consistent with the value of the rest of the houses. If they are generating sufficient revenue, then the increased assessment would result in reduced millage.
Or, the response could have been "in your case it certainly appears as though real estate values have not decreased, therefore minimal underwriting risk is present due to natural gas development activity taking place in the area"
 

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Oh, BTW, having dealt with HUD, yes they are fearmongers, or at best nanny staters that are in love with red tape.
Not so much "in love with red tape", as in love with creating as much of it as they can dream up.

When I was managing rental properties some years ago, had a few dealings with both state and federal housing agencies, via assorted Section 8 type tenants.

The county and state housing agencies used the same housing inspector, but each had their own criteria upon which to base acceptability for their "clients". The inspector looked at the same townhouse for two different clients (one a county client, the other a state client) and one was found acceptable, one not acceptable. Mostly based on their projected elec. costs per month.

Neither projected figure was anywhere close to what the previous tenant had paid in actual costs (one agency's figure was twice the actual cost), but the agencies had their own figures. Apparently pulled from someone's hat?

IIRC, the state agency used HUD's criteria for such decisions?
 
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