Pennsylvania home values worrisome for Coloradans who live near drilling
As oil and gas drilling in Colorado, both on the Front Range and, more recently, the Western Slope, moves into urban areas, a recent report in Grist.org sends a chilling message to homeowners in communities like Parachute, DeBeque and, soon, Whitewater that are in close proximity to oil and gas fracking operations. Already faced with falling property values, their financial futures could be compromised further by an inability to sell their homes at all.
According to a Bradford County real estate broker in Pennsylvania’s Marcellus shale area, “residential mortgage lending is an especially murky situation” where homes are located near fracking operations. Grist reports, “National lenders are becoming more cautious about underwriting mortgages for properties near fracking, even ones they would have routinely financed in the past.”
With 93 percent of Bradford County leased to gas companies, large national banks are, according to Grist, no longer offering mortgages in the county. Area banks, dependent on the local mortgage market, are still lending, but the big ones like Wells Fargo have pulled out.
A Bradford County couple was refused a new mortgage on their $230,000 home because, as Quicken Loans explained in an email, “Unfortunately, we are unable to move forward with this loan. It is located across the street from a gas drilling site.”
This application apparently was the first time a Pennsylvania homeowner was denied a mortgage because of a neighboring gas well. Colorado’s 2nd District Rep. Jared Polis, who has his own personal experience of fracking leading to a “haircut on a property’s values,” said, “Folks nationally are watching this case.”
In Polis’s dispute with the company that drilled property adjacent to his summer home, no mortgage issues were involved, but the congressman characterized the experience as “just an example of how little right ... homeowners have; how, without recourse, families can be driven from their homes for weeks or even months, and we need to change the laws in Colorado.”
Though Grist concentrated on one Pennsylvania county, it said the issue is far more widespread. “Lawyers, realtors, public officials and environmental advocates from Pennsylvania to Arkansas to Colorado are noticing that banks and federal agencies are revisiting their lending policies to account for the potential impact of drilling on property values, and in some cases are refusing to finance property with or even just near drilling activity.”
The Federal Housing Administration, for example, will not finance property within 300 feet of “an active or planned drilling site.” An FHA spokesman explained to Grist, “FHA is primarily concerned with the health and safety of the occupants of the dwelling. If the property is subject to smoke, fumes, offensive noise and odors, etc. to the extent they would endanger the health of the occupants then the property is ineligible. FHA is also concerned with the risk to the insurance fund. So if the property is subject to those same items and the health of the occupants is not endangered, but the marketability of the property is compromised, the property may not be eligible for FHA insurance.”
Insurance is another growing problem for homeowners with gas or oil facilities on or near the property, since many homeowner policies do not cover damages caused by fracking operations. The possibility of not obtaining insurance makes it essentially impossible to buy or sell property where fracking is nearby.
As ColoradoPols report put it, “People who live near fracking operations were likely already concerned about their ability to sell their home in the future, but the news out of Pennsylvania is even more worrisome. If people can’t get a home loan because of an oil and gas operation that is near their neighbor’s home, entire communities could be upended. If a potential buyer can’t get a loan to buy your house, then you’re never selling that house ... and foreclosure becomes a very real option.”
ColoradoPols suggested if mortgages “start getting denied on a larger scale” it might be enough “to topple residential fracking practices altogether” in Colorado.
If Colorado is to avoid the problems plaguing Pennsylvania homeowners in the gas patch, we should act now to protect homeowners from the inevitable damage drilling causes to home values before it is too late.