One in 20 Americans now lives within a mile of a hydraulic fracturing, or “fracking,” operation, and in addition to the economic and environmental advantages and disadvantages that the oil-drilling method produces, fracking can have a large effect on homeowners’ mortgages, property rights and home insurance, according to new research by HSH.com.
With heated debates on fracking springing up in many communities, HSH.com aims to inform consumers of the facts, as well as the risks and rewards of fracking as it relates to their current property, or property they may be planning to purchase, lease, sell or insure.
"HSH.com wanted to have a matter-of-fact piece to give homeowners and buyers a clear look at the issue, free of emotion or politics,” HSH.com vice president Keith Gumbinger said.
Earning money for selling mineral rights and the potential for a revenue stream from drilling may be attractive to homeowners. However, those shopping for a new home should understand that fracking rules can vary between states, and in many cases, the homeowner may not be the one in charge of their mineral rights. Through various legal maneuvers, builders and developers have been hanging onto and selling the mineral rights of new homes, leaving homeowners relatively powerless in the fight.
A title search can help determine whether the owner of the property also owns the underground rights, but it would have to go back 100 years for legal reasons.
If a homeowner decides to sell mineral rights, HSH.com reports that homeowners must understand what their mortgage lender’s rules are when it comes to their home. Federal guarantors – Fannie Mae, Freddie Mac, FHA – have regulations in place that can affect a mortgage, including:
►Transferring mineral rights on your property without the written consent of your lender
►Storage, use, disposal, discharge or release of environmentally hazardous material, specifically gas, on your property
►An active well or planned drilling within 300 feet of an existing property
Depending on a lender’s position on these issues – outlined within a mortgage agreement – the value of a homeowner’s property can be drastically altered, so homeowners should check with their lender to understand the risks associated with fracking on their property.
Fracking has led to mini earthquakes and other hazards that are a threat to the land and home. With fracking growing across the country, the insurance industry has taken the stand of not covering the associated risks, and companies don’t include items like water pollution in their policies.
Before leasing a property to an oil company, homeowners should get a lawyer to help them fully understand the intricacies and potential pitfalls of an agreement, and the legal avenues available to them should any deal prove to be disadvantageous.
To understand the full issue of hydraulic fracturing and the benefits and risks associated with it, read Homeowners: How do mineral rights and fracking affect you? by investigative reporter Ed Leefeldt.