There have been a lot of questions raised about D.R. Horton’s ‘energy wing’ (that’s right, a homebuilder with its own energy company) and mortgages in North Carolina’s potential frack zone. Indy story on it here. Now, the State Employees Credit Union says selling mineral rights are not allowed under the standard Fannie/Freddie deeds and are generally not cool.
Just got this from the mineral rights peeps at RAFI:
LENDERS: FRACKING PRESENTS MORTGAGE RISK
North Carolina landowners who sign oil and gas rights leases could be ineligible for mortgages from the State Employees Credit Union and mortgages backed by Fannie Mae or Freddie Mac.
A statement by the State Employees Credit Union, released last month, reads:
The standard Fannie Mae/Freddie Mac Deed of Trust document recorded for most real estate liens prohibits the homeowner from selling or transferring any part of the property during the term of the loan without obtaining prior written approval from an official of the financial institution holding the mortgage. This includes the oil, gas and minerals found on the property. Any property financed with a State Employees’ Credit Union mortgage falls under the aforementioned restriction. Approval of exceptions from State Employees’ Credit Union would not be granted due to heightened risk concerns associated with extraction of these natural resources, including hydraulic fracturing technology (otherwise known as fracking or horizontal drilling).
“The policy adds another layer to debate over legalizing fracking in North Carolina. It highlights the risk that mineral rights leases can present for landowners even before drilling starts,” said Jordan Treakle, Mineral Rights Campaign Coordinator at the Rural Advancement Foundation International — USA.
The organization is consulting on landowner rights concerns for the State Attorney General’s section of the state’s Shale Gas Report. The report is expected in early May.
Fracking is illegal in North Carolina, but in 2010, companies began approaching landowners in Lee County. About 80 leases, accounting for more than 9,000 acres, were signed. Lessors likely did not know that oil and gas leasing could affect their mortgages.