New revenues for lenders, investors and servicers found in helping oil exploration and production companies save their energy leases when properties foreclose
DALLAS, TX (March 26, 2013) – Wingspan Portfolio Advisors, an award-winning, diversified mortgage servicing company, started working with oil and gas exploration and production companies last year to help them preserve energy leases in residential communities, and has made an interesting discovery in the process. Lenders, investors and servicers are leaving money on the table when they take properties back and when they remarket REO – money the oil and gas companies are eager to pay them.
It all has to do with what the mortgage industry doesn’t know about these leases, according to Steven Horne, CEO and president of Wingspan Portfolio Advisors. Oil companies have leases under entire communities that permit horizontal drilling processes to recover natural gas and oil deposits, and servicers are often unaware of them. If the lease is lost due to foreclosure and a subordination agreement is not worked out, significant production lasting from 20-30 years can be lost.
“Lenders and servicers are definitely missing a revenue opportunity,” Horne says. “Subordinating a mortgage for an oil and gas lease is not like allowing a typical lien that poses a foreclosure risk. The mortgagee can still foreclose, but it will not wipe out the lease,” he explains. “The oil and gas companies will pay a subordination fee, and it can be significant, depending on the location and productivity of the lease in question.” Horne says that these fees can run as high as $500 in the oil rich areas of Texas, Colorado, Pennsylvania, and other states.
At the same time, properties currently in REO portfolios may have former leases that energy companies are keen to renew. “Tens of thousands of leases were wiped out during the foreclosure crisis,” Horne notes. “When banks own REO, they are generally unwilling to execute a new lease on a property either because they are misinformed or unaware of the benefits they are passing up. Servicers should also know that leaseholders are motivated to help with costs associated with completing loan modifications if it can help keep a borrower in place and preserve an existing energy lease.”
Horne believes that the time is ideal for bringing the oil and gas community together with the mortgage industry for the benefit of all. “Based on a recent project we conducted for a major exploration and production company, we have come to believe that up to 25 percent of the oil, gas and mineral leasehold properties in the country may be in danger of losing their leases unnecessarily,” says Horne.
The main requirement for successful lease preservation efforts that benefit both oil and gas companies and the mortgage industry is expertise in both businesses, Horne observes. Without an understanding of how working with exploration and production companies can be to their advantage, there is little motivation for mortgage investors and servicers to entertain solutions. So a specialist like Wingspan Portfolio Advisors, with expertise in mortgage servicing and in preserving the interests of oil and gas companies, can bridge the gap and improve outcomes.
“We’re in an environment where there is much riding on the success of the oil and gas industry at making us less dependent on foreign energy and on the long-term health of the housing finance system,” Horne says. “Wingspan can help both sides achieve their goals, while enhancing these essential and strategic segments of the economy for generations to come.”
About Wingspan Portfolio Advisors
Wingspan Portfolio Advisors, LLC, is an award-winning, diversified mortgage servicing company, partnering with banks, investors, mortgage insurers, attorneys and real estate agents throughout the U.S. With several offices in Texas and Florida, Wingspan’s team of experienced professionals provides a wide range of strategic services to assist the mortgage industry in virtually every aspect of loan servicing. For more information on Wingspan Portfolio Advisors, please visit www.WingspanPortfolioAdvisors.com.