Two questions: 1) Does anybody have a good contact at Wells Fargo, such as a veteran oil and gas banker, who would be able to help me with getting a Subordination Agreement? 2) If there is a lien and a Deed of Trust is filed with Wells Fargo as lender, does Wells get the royalty payment if no Subordination Agreement is signed or does the payment just go in suspense?
I keep hearing nightmare stories how no landmen has ever been successful at getting a Subordination Agreement from Wells. Everybody says the bank has no expertise and all they do is switch you from one individual to another until you get worn out and quit trying to get it.
I've been told to tell the bank that they should sign it because it decreases the chance that mortgagor will default because mortgagor could have a royalty stream and/or revenues from surface agreements to pay off the note. If mortgagor does default with a Subordination Agreement in place, the lease remains and goes with the property thus making it more valuable and easier for the bank to unload. Any other selling points?
This is an urgent matter and I would appreciate any help that would prevent me from having to listen to Corporate Voice Mail Hell all day tomorrow. :)
John, I recall this issue coming up before with Wells Fargo. I would use the search function at top right of this page. Search "subordination agreement wells fargo". I found 3 replies that may be of use to you. I hope this helps.
Thanks for your reply. Before I posted this, I had done exactly what you mentioned above ^. Unfortunately, I did not find complete answers to my questions. Based on a post from m peterson, I can conclude that the royalty is "held up" unless Wells signs a subordination agreement. OK, but does Wells hold the royalty or is it the oil co.? I'm asking for a great contact at Wells because I do not know one landman (or mineral owner) who has ever been successful at getting Wells to sign and return the Subordation Agreement for an oil lease. Please let me know if you have anything to add. Thanks.
I thought Oldoaks reply and the replies from the link he posted were pretty enlightening. You own the land and the bank holds the note and the bank is not entitled to income the property generates. The bank does not want to sign off on the subordination agreement, you may have to retain an attorney to get their attention. If you have been going around and around with Wells Fargo for more than a month, I would have already consulted an attorney. Many companies in different fields do things with no basis in law, they get away with it as long as you let them. This will probably go on as long as you will allow it. I wish you good luck.
In my case, I am dealing with a home equity loan. So, after speaking with 1) the local small town Wells Fargo banker, 2) a recommended WF banker from a fellow blog poster, 3) WF Private Bank Oil and Gas in Houston, 4) WF PB O&G in Denver (luckily the supervisor is a landman), 5) WF Home Mortgage, 6) WF Home Equity, and 7) WF Subordations Department, I have finally been told... (drumroll)... that there is a Consent to Lease Form. The Borrower must request it; however, so I have not yet looked it over. If there are any shortcomings, maybe what we can do is add a Subrogation Clause to the Lease so that the oil co has the right to pay off the home equity loan if the individual cannot. I'm not sure if this would be an Amendment to the Lease or a Ratification. hmmm
Good luck, Sir! Banks are extremely reluctant to execute Subordination Agreements because most of them have absolutely NO clue about oil-and-gas matters and they don't see how they benefit from signing one. I did get one from Wells Fargo but it took many, many months. The main party who benefits from a Subordination Agreement is the Lessee and assigns, because if they lease you and your tract is either a drill-site tract or a tract near to the lateral of a horizontal well, and you default on your instrument of indebtedness, they can make your loan payments and thereby not lose their investment in your tract. I don't see how an attorney would help you, Wells Fargo is not obligated to sign it, some banks absolutely will not sign any Subordination Agreement as a matter of policy. Regarding your thought about a Subrogation Clause to your existing lease, I bet your lease already has language in it allowing Lessee and assigns to make your loan payments if necessary, read it closely. If so, there is no need to execute an Amendment of OGML. A Ratification would not apply here.