Replies to This Discussion

Permalink Reply by The_Baron on December 4, 2008 at 5:56

Not to mention that rates are dropping again...may be woth refinancing anyway.

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Permalink Reply by Sillysas on December 7, 2008 at 8:06

I spoke with title company and they said that they can't change any of the terms of your mortgage. That my mortgage payments can't change, that nothing about my loan can change from how it is now. So maybe I don't completely understand what you are saying. They did tell me that Wells Fargo does take the royality checks though and applies them towards the principal on the loan. I do not care if they do that, because it still helps me. So my understanding is that nothing will change for me, they can't change anything about my loan or my payments or make me pay more, or pay it off earlier. It's the same loan as I've always had. Just the royalities go towards my principal. Is that right, is that what you're saying? I don't quite understand what you've said above. Are you saying they can require me to pay my mortgage off earlier or pay more than what I pay now? Or are you just talking about the royality checks. I could care less about the royality checks as long as it helps me in the end. Can you clarify in "plain english" for me? I understand the part about foreclosures and such, just not part 2 and 3 or your statement "accelerating the loan", "encumbering the property", etc....Thanks. I also don't understand about the other person talking about a requirement by Wells Fargo for "supplemental insurance" to their flood policy. I'm not even required to have flood insurance. Thanks again!

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Permalink Reply by Dion Warr, CPL on December 8, 2008 at 10:24

Sandii:

KB fielded this one for me (very well, I might add).

The remedy stated above would be used if one wished to have claim to all of their bonus and royalty, without having any issue of the lender directing the borrower or O&G company how to pay same.

If you have no objection to WF taking your payments due under the terms of the lease and applying them to principal until your loan is paid, then stay your present course.

Many folks prefer to be able to collect their bonus and/or royalties without lender interference, and to that end, they may wish to employ the remedy stated above. It would take the situation where the borrower possibly cannot collect their lease monies (and having them redirected to the lender) due to the existence of the prior mortgage, and reverses it in the landowner's favor, such that the oil and gas lease would be filed prior to their new lender's mortgage document.

This would eliminate the need for the O&G company to obtain a subordination from your lender, and having your lender lay out conditions on the borrower and the O&G company in order to preserve the lease in the event of default.

The flood insurance thing, IMO, was a rant about what some of these lenders try to pull in tacking on requirements, extra fees, etc.

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Permalink Reply by Rodney Weldon on December 9, 2008 at 3:55

I have a Wells Fargo mortgage. They will not SUBORDINATE their lean to an oil and gas lease for any reason. This means that I will not be able to get any signing bonus.

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Permalink Reply by The_Baron on December 9, 2008 at 5:37

Will they subordinate if you apply the money to the loan?

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Permalink Reply by The_Baron on December 9, 2008 at 5:38

It may be time to refinance with a better bank.

Interest rate are low now anyway.

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Permalink Reply by Dion Warr, CPL on December 9, 2008 at 5:43

Rodney:

Do you have the ability to refi? Is the bonus money significant enough to cover the closing cost and fees?

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Permalink Reply by smith1 on December 9, 2008 at 6:44

We have Wells Fargo mortgage, rec'd our bonus signing $'s in August, with no problem. I put in my checking account.

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Permalink Reply by Dion Warr, CPL on December 9, 2008 at 6:50

Smith1:

Hoping you do not have a problem, but the next obstacle comes if you get put on the drilling program. Title Opinions and requirements might induce O&G to contact you and your lender for a subordination, at which point all will be known (it is very possible that your landman may have not known of the prior existing mortgage or versed in the other somewhat 'standard' procedure of withholding the bonus payment prior to contacting WF for a subordination. Good luck to you.

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Permalink Reply by Rodney Weldon on December 9, 2008 at 6:54

Mr Smith- what steps did you have to go through to get WF to subordinate? Rodney

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Permalink Reply by Sillysas on December 9, 2008 at 7:23

What happens if you sign the lease with the O&G company, get your bonus money and then the mortgage company refuses to sign the subordination agreement? Is the contract with the O&G company just voided then and you repay the bonus money given? Can the O&G company do anything else to you because it can not be subordinated (extra fees, sue, etc.)? I've had other people with WF and they have had no problems get subordinations as long as they agree to WF applying the royalities to the principal of the loan.

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Permalink Reply by Dion Warr, CPL on December 9, 2008 at 7:54

Worst case scenario:

Lender accelerates your payment of the loan (or makes demand on the note), claiming that waste or diminishment of the pledged asset (your land, including minerals and the improvements. The lender has you by 'the shale', unless you can pay the note off. It appears instead (by the postings here) that WF will just take your future royalty payments (and/or your lease bonus, at its option, and granted enough notice) in exchange for signing off on the lease, and agreeing to subordinate same to the lease.

If you do not choose to comply with the terms, your lender and O&G can do it for you. Under the terms of most form leases, lessee is granted the ability, without your joinder, to discharge any tax, mortgage, or other lien upon the land and have the right to repayment to lessee any rentals and/or royalties accruing thereunder. Thus, the lender could give notice to you and O&G and state their terms for not finding you in immediate default, and O&G could settle with them without your consent, and claim against future revenue, in order to protect their lease.

What other things that lender could do (fees, etc.) depends upon the content of your mortgage agreement.

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