How Fracking Could Affect Mortgages

  |  May 22, 2012

We’ve heard about the environmental issues related to fracking, but there’s another level of concern for homeowners: it’s possible that the fallout from fracking could alter, even void, a mortgage. The NY State Bar Association Journal recently published an article, Homeowners and Gas Drilling Leases: Boon or Bust?, that explores how fracking might possibly affect a homeowner’s mortgage. “Residential mortgages prohibit borrowers from committing waste, damage or destruction or causing substantial change to the mortgaged property or allowing a third party to do so,” the study reads. “This includes operations for gas drilling. Standard residential mortgages prohibit borrowers from causing or permitting the presence, use, disposal, storage, or release of any ‘hazardous substances’ on, under or about the mortgaged property.” And, no matter whom you believe about the relative danger or safety of fracking, there are waste products from the practice.

One bottom line: “Signing a gas lease without lender consent is likely to constitute a mortgage default.” And another: “Residential fracking, perpetual unfunded easements and long-term gas storage beneath mortgaged homes create a cumulative threat to the repayment of mortgage loans tranched in secondary mortgage market portfolios.”

Read On, Reader...