Welcome to The Home Equity Theft Reporter, a blog dedicated to informing the consumer public and the legal profession about Home Equity Theft issues. This blog will consist of information describing the various forms of Home Equity Theft and links to news reports & other informational sources from throughout the country about the victims of Home Equity Theft and what government authorities and others are doing about it.
Thursday, December 27, 2012
Clauses In Existing Mortgages Create Hang-Ups For Landowners Seeking To Cash In From Natural Gas Drilling Craze
In Youngstown, Ohio, the Youngstown Vindicator reports:
Some landowners who have signed lease agreements with oil and gas companies are running into a problem based on mortgage-contract language.
“A lot of these mortgages appear to contain clauses that would give the banks first dibs on any royalty income or even bonus payments,” said Tom Carey, an attorney for Harrington, Hoppe & Mitchell, Ltd., a Youngstown-based law firm.
BP has been directing lessees to have this language in their mortgage and have their bank sign a subordination agreement before completing the lease, he said. The landowner typically has 60 days to get the bank to sign the agreement.
“Some banks are willing to sign; others are requiring an application and a fee; others are just refusing to sign,” Carey said.
The mortgages were made to people based on collateral and their ability to repay, he said. Oil and gas leases were not something that was being considered.
“I think if someone receives a big lease bonus payment they would be more likely to repay,” Carey said. “We’ve even agreed to pay the bank the next year’s payments from the lease bonus, whatever it takes to move things along.”
It would be understandable if the banks were stating that allowing drilling could make reselling a property difficult in the event of a foreclosure, especially if drilling is under way on the property, he said.
“The deal is that in some cases, [bank employees] don’t want to take a chance,” Carey said.
Banks with local branches have been easier to work with, but bigger problems have arisen when mortgages were sold to groups based outside the area, he said.
“One person’s mortgage was sold to Fannie Mae, and trying to get a real person on the phone at Fannie Mae is impossible,” Carey said. “When we did get in touch with someone, they said he would have to fill out a form, pay $295, and it would take six weeks to get a decision.”
The lessee has only 60 days to get the issue taken care of for the lease to proceed with BP, Carey added.
The issue with the subordination agreements is due to mortgage language that was inserted into the contracts to protect the banks, said James Thurston, communications manager for the Ohio Bankers League.
The goal was to protect the bank from damage that could come to the house through it being demolished, used for drug trafficking, or a number of other issues that would diminish the value, he said.
“For example, if you have a $300,000 house and something is done on the property that creates a sinkhole next to it, the property is now worth zero,” Thurston said. “A lot of these mortgages were written by small community banks that couldn’t afford to inspect each and every one of these 500 to 600 properties they have on the books, so they had to protect themselves through contract language.”
The contract language has nothing to do with oil and gas development, but those lease agreements have gotten caught up in the general-protection language, he said.
Banks have to take precautions in contract language because “if we don’t, we’ll get spanked by our regulators,” said Rod Alba, general counsel for the American Bankers Association.
Mortgages have to contain clauses to ensure there will be nothing done to the property that makes it impossible for the bank to recoup its investment during a sale, he said.
Banks have to be cautious because it’s not about what the perceived value of the property is, but what the market will pay for it, Alba said.
Carey said he is not sure how widespread of a problem the subordination agreements are, but has seen 15 to 20 people come to his firm with the issue.
CBC News: Betrayal of Trust (A CBC investigation reveals how lawyers across Canada have misappropriated and mishandled clients money, to the tune of tens of millions of dollars, or sometimes even charging vulnerable people top dollar for shoddy services)
Land Contract/Contract For Deed/Rent-To-Own Rackets
The New York Times: The Housing Trap (In the wake of the housing crisis, low-income families have turned to seller financing to buy homes but these deals can be a money trap)
Beware The Fine Print: Consumers Forced To Sign Away Their Rights To Use Court System
The NY Times: Arbitration Everywhere, Stacking the Deck of Justice(Part 1 in series examining how clauses buried in tens of millions of contracts have deprived Americans of one of their most fundamental constitutional rights: their day in court)
Foreclosure Mills' Abysmal Record In Complying With New NYS Foreclosure Requirements
Justice Deceived: How Large Foreclosure Firms Subvert State Regulations Protecting Homeowners
MFY Legal Services Report On Questionable Practices By Process Servers In Debt Collection Cases
Justice Disserved: A Preliminary Analysis of the Exceptionally
Low Appearance Rate by Defendants in Lawsuits Filed in the Civil Court of the City of New York
Mortgage Mess Redux: Robo-Signers Return (A Reuters investigation finds that many banks are still employing the controversial foreclosure practices that sparked a major outcry last year)
CNN Video: As Foreclosures Mount, Florida Court Turns To 'Rocket Docket'
The Wall Street Journal: A Florida Court's 'Rocket Docket' Blasts Through Foreclosure Cases (2 Questions, 15 Seconds, 45 Days to Get Out; 'What's to Talk About?' Says a Judge)
"Produce The Note" Strategy When Dealing With Missing Promissory Notes In Foreclosure Actions
ABC Video: Fighting Against Foreclosure (Some homeowners have found a new tactic to keep the banks at bay)
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