Replies to This Discussion

Permalink Reply by The_Baron on December 1, 2008 at 8:13

If you did get a subordination, when was this? the banks policy may have changed since then, and what did they require of you then?

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Permalink Reply by Gas Baron on December 1, 2008 at 9:03

Sheila C
Contact JPD Energy
They may have a different one for Country Wide
I was in the Greenwood Group
Chase told me I had to use theirs and Charged $300 nonrefundable.
JPD worked out a different form for Chase that they both accepted. Of course I still had to fork over the $300 to Chase but I got paid
JPD may have done the same with Country Wide so give JPD a call

If you are in the Southern Hills group can you give me your Group Leaders name and # I can pass it on to our Greenwood Hills Group leader and he may be able to assist your entire group with what we have already gone through as far as Forms for the Banks.

I sent a friend request so that I can email you information.

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Permalink Reply by Sheila C on December 1, 2008 at 12:07

I was never informed that I needed to get a subordination on my lease. The questions I am posing regarding the subordination is on behalf of a family member who was asked to get this from Countrywide and she is part of the Southern Hills group. We signed back in August before the slowdown and our group was not given anything to present to our mortgage company. What repercussions could we expect from Countrywide since they are unaware of the lease? Really, what business is it of their's if I am paying my mortgage on time?

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Permalink Reply by Gas Baron on December 1, 2008 at 13:21

Have you gotten paid yet?
If you have and the lease is filed you have nothing to worry about.

Your family member / Southern Hills Group will need to have it done because it is something JPD/ CHK requires "now"

As far as filling out the form . JPD Energy will fill out and Notarize one section and Country Wide will do the same for their section of the form. The Mineral Rights owner will only sign on part at the Bank

JPD and Country Wide will know what to do they are who need to be contacted so they can work it out between themselves

Chase required a Plat showing my property and the location of the proposed drilling site.
JPD supplied that for me to give my bank

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Permalink Reply by Gas Baron on December 1, 2008 at 13:33

Found this in an old Greenwood Hills Group email
Maybe it will help your Family Member
We have a mortgage with Country Wide. The number to their Oil & Gas Lease Dept is 800-376-4140. They are mailing us a package that we send to JPD who then fills it out, sends a map of where they are drilling and $150 .Once we receive the information back from JPD and CW receives it, it will take about 45 business days for the lender to approve it.

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Permalink Reply by P.G. on December 1, 2008 at 13:21

One would think mineral rights wouldn't be an issue with a mortgage company. I wonder how many loans have been denied because the mineral rights weren't included with the land by a previous owner?

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Permalink Reply by Gas Baron on December 1, 2008 at 13:52

It basically stated that if the Home Owner defaulted or was late on Mortgage payments.
The Mortgage Company could inform JPD/ CHK and request the Royalties to be sent to the Mortgage company for Payment

NOW, THEREFORE, in consideration of the premises and the mutual promises of the parties set forth below, the parties hereby agree as follows:
1. NONDISTURBANCE. Mortgagee acknowledges and agrees that during the life of the Lease encumbering the Mortgaged Property it will not infringe upon or disturb the leasehold interests of Lessee, and Lessee shall continue in the quiet enjoyment of same, including, subject to the provisions of Section 2 hereof, the right to pay all rents and royalties payable under the Lease to the Mortgagor.
2. PAYMENT OF ROYALTIES. Lessee agrees, in consideration of the execution of this Agreement by Mortgagee, that in the event the Mortgagee advises Lessee in writing that the Mortgage of Lessor is delinquent, then Lessee will pay to Mortgagee all royalties and rentals due or to become due until further notice by Mortgagee that the Lessor is no longer delinquent upon receipt of written consent by Lessor.
3. ATTORNMENT. In the event the Mortgage is foreclosed for any reason, and the Mortgagee succeeds to the interest of the Lessor under the Lease, the Lessee agrees that it shall recognize the Mortgagee as the successor in interest to the Lessor and to any and all of the right, title and interest of the Lessor under the Lease. In such case, the Lessee also agrees to render to the Mortgagee the performance of all of the Lessee’s obligations which, under the terms of the Lease, are for the benefit of the Lessor, for the balance of the term of the Lease remaining, with the same force and effect as if the Mortgagee were the Lessor under the Lease.
The Lessee hereby attorns to the Mortgagee, such attornment to be effective and self-operative, without the execution of any further instrument on the part of either of the parties hereto, immediately upon Mortgagee’s succession to the interests of the Lessor under the Lease; provided, however, that the Lessee shall not be obligated to pay royalties payable to the Lessor under the terms of the Lease to the Mortgagee until the Lessee shall receive written notice from the Mortgagee in accordance with the terms of Section 2 hereof. The respective rights and obligations of the Lessee and the Mortgagee upon such attornment shall, to the extent of the then remaining balance of the term of the Lease, be the same as now set forth in the Lease. The Lease and all of its terms are hereby incorporated by reference in this Agreement with the same force and effect as if set forth completely herein.
4. CONFLICT BETWEEN AGREEMENT AND LEASE. In the event of any conflict or difference between the terms of this Agreement and the terms of the Lease, Lessee agrees that the terms of this Agreement shall supersede and be applicable in lieu of the terms of the Lease.
5. BINDING EFFECT. The rights and obligations of the parties hereunder shall bind and inure to the benefit of the respective successors and assigns of the parties hereto.
6. AMENDMENTS. This Agreement may not be amended or modified except by a writing signed by Mortgagee and Lessee or their permitted successors and assigns.
7. GOVERNING LAW. This Agreement shall be construed and interpreted in accordance with and be governed by the laws of the United States insofar as they may be applicable, and if such laws are not applicable, then under the laws of the state in which the Property is located.
8. NOTICE. Any notice or communication required or permitted hereunder shall be given in writing, sent by (a) personal delivery, (b) delivery service with proof of delivery, (c) United States mail, postage prepaid, registered or certified mail, return receipt requested or (d) prepaid telegram or facsimile transmission (provided that such

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Permalink Reply by Spring Branch,mineral owner on December 1, 2008 at 18:39

This is possibly off subject, but what happens in the following case? Landowner wants to sell his minerals for a lump sum, but the property has a mortgage with the Federal Land Bank. Landowner, to appease mineral buyer, goes to Federal Land Bank and gets the land Bank to execute a Subordination Agreement. The minerals are encumbered by a lease which has one year remaining in the primary term and a two year option period for a total of three years remaining, assuming option exercise. Upon reviewing the Subordination Agreement, mineral buyer discovers that the mortgage is being subordinated to the oil and gas lease, not to the mineral interests themselves. Unless the property owner agrees to use the proceeds from the sale of his minerals to pay off the mortgage in its entirety, how does the Subordination Agreement protect the mineral buyer's interests in any way? If the landowner defaults on the mortgage, it would seem to me that the lesssee's rights are protected, but that the mineral buyer, as the de facto lessor, would lose his royalty income to the Federal Land Bank until the loan was paid off and may in fact, in the event of foreclosure, lose his royalty altogether.

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Permalink Reply by Gas Baron on December 2, 2008 at 1:29

Reply by KB
All this leads to the following question though--who signs that attornment? Does the landowner/mineral seller? If s/he does not sign it, how is s/he bound by it? Is s/he? Arguably, no.

JPD signed and notarized their section I then took the form to the Chase Legal Dept . While there I signed my section and the Rep from Chase Legal signed theirs and Notarized it. I then returned it to JPD and was paid my Bonus money by check in 3 days

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Permalink Reply by Grice on December 2, 2008 at 2:20

I do not believe you are wrong.

From what I have read, the original practice of obtaining a subordination agreement, was to prevent a tenant from being evicted, should the landlord face foreclosure. The subordination was claimed by the tenant, allowing the tenant to pay all future payments directly to the lender, and remain as a tenant until the property was resold. From what I have read, this was usually not done until the tenant was advised of a potential eviction. This subordination agreement was binding between the tenant and the lender, and did not require any obligation from the landlord.

It is my belief that, should the lease owner (tenant) wish to subordinate their leasehold, in the event the mineral owner (landlord) face foreclosure, the lease owner should petition the mortgage company (lender), and should not burden the expense upon the mineral owner.

Hopefully, someone can provide justification for requiring the mineral owner to seek a subordination agreement from their mortgage company. If so, maybe they could also relate that to how it would apply if the mineral owner is not the same as the surface owner. If the minerals were reserved by the previous owner, who would be required to seek subordination? Were it found that, through intensive title search, the property owner does not have the mineral rights to the property, would that completely void the intent of requiring the landowner to seek the subordination agreement?

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Permalink Reply by Grice on December 2, 2008 at 3:12

KB, I am unable to directly respond to your previous post.

The prior mineral owner would retain the mineral rights, and would create the mineral servitude upon exercising that right. This could be done by either self operations, or through the permission granted to another (forming a lease agreement). However, I do think the two compliment each other. Regardless if the mineral owner has created a servitude or not, prior to transfer of surface ownership, I reserve the opportunity for seeking justification of burdening the property owner of the request for subordination.

On a secondary note; Would it be unfounded that, according to your response, by the simple request for subordination, mineral rights ownership would have been determined prior to the request?

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Permalink Reply by P.G. on December 2, 2008 at 3:29

How would this be unlike say someone buys a house and uses a mortgage and then must later move and doesn't sell the house (which could happen in this housing market), but just leases it out. Then sells that lease to an investor for a discount to let the investor manage and collect the rents. What would happen to the investor if the home owner defaults on the mortgage? Wouldn't the mortgage company want to collect the rents?

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