The always-thoughtful Kurt Cobb has a great piece on the intersection between the hydrofracking boom and the mortgage mess:
One fact ought to tell you all you need to know about the risks faced by homeowners signing leases for natural gas drilling on their property: Wells Fargo & Company, both the largest home mortgage lender in the United States and a major lender to the country’s second largest producer of natural gas, Chesapeake Energy Corp., refuses to make home loans for properties encumbered with natural gas drilling leases.
This salient fact comes from an article (PDF) written for the New York State Bar Association Journal by attorney Elisabeth N. Radow. Written in the form of an even-tempered legal brief, Radow relates one astounding finding after another. Perhaps most relevant to homeowners who either have signed drilling leases or who may be asked to sign them in the future is this: “Signing a gas lease without lender consent is likely to constitute a mortgage default.” You read that right. Default.
The whole thing is well worth a read, particularly in light of the fact that the play out rates for new wells are astonishingly high – much more than the industry likes to discuss. Signing a new hydrofracking lease means an old wellhead on your property in just a few years in many cases.
Besides the specific impact on homeowners that Cobb discusses, boom and bust cycles are bad for communities generally. That’s the last thing rural upstate New York needs another of – low income local residents forced out as new money flows in – and then more abandoned industrial infrastructure. Because, after all, we ain’t got any of that already around here…