Servicing Guide

Published November 10, 2020

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What conditions must be met in order to approve a request to lease oil, gas, or mineral rights to be approved?

The servicer must determine whether the leasing of oil, gas or mineral rights meets the conditions in the following table.

Conditions required to approve a lease of oil, gas, or mineral rights
 

The mortgage loan must be current.

 

The mortgage must have been originated greater than 12 months prior to the date of the request.

 

The mortgage loan must not have been

  • greater than 30 days past due more than once in the most recent 12-month period, or

  • otherwise in default under the terms of the mortgage loan over the most recent 12-month period.

 

Granting of oil, gas, or mineral leases is customary in the area.

 

Exercise of the lease does not prevent its use for residential purposes or expose the residents to health or safety hazards.

 

Any reduction in the value of the property as a result of the lease does not exceed the amount of any royalty payments received in exchange for the lease.

 

Any drill sire located on the property lies outside of a 500-foot radius from the exterior walls of the residential dwelling or any other structures associated with the collateral property, including but not limited to detached garages, storage sheds, or accessory dwelling units.

The servicer must evaluate requests for the leasing of oil, gas, and mineral rights based on the specific circumstances of the request, as described in the following table.

If the leasing of oil, gas, or mineral rights... Then the servicer...

meets all of the conditions and the LTV based on the estimated property value with the lease, any applicable drill site and/or ingress and egress across the property in place is less than 60%

is authorized to approve the lease on Fannie Mae’s behalf and waive Fannie Mae’s interest in any royalties under the current terms of the lease.

meets all of the conditions and the LTV based on the estimated property value with the lease, any applicable drill site and/or ingress and egress across the property in place is greater than or equal to 60% is authorized to approve the lease on the Fannie Mae’s behalf if the borrower agrees to apply royalties to the mortgage loan balance by an amount sufficient to maintain the LTV ratio immediately prior to the lease.

See below for related Q&A's:

What information is required to evaluate a request to lease oil, gas, or mineral rights to the property?

What should be considered before agreeing to a lease of oil, gas, or mineral rights to the property?

Can a request to lease oil, gas or mineral rights be approved if all of the required conditions are not met?

For more information please see: D1-1-01, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan

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If you have additional questions, Fannie Mae customers can visit Ask Poli to get information from other Fannie Mae published sources.

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