Appalachian Basin

New Report: Fracking Responsible for 58% Lower Rate of Mortgage Defaults in Pa.

Researchers from Clemson University have released a new report showing that areas of Pennsylvania where shale development is taking place saw dramatically lower rates of mortgage defaults than elsewhere during the “great recession.”  From a media release announcing the findings:

“The research, by Lily Shen, assistant professor of finance in the College of Business, examined data from 2004 to 2011 and found that mortgages originated in shale-gas fracking regions of Pennsylvania had a 58 percent lower default rate compared to the state’s average rate of default.” (Emphasis added)

Researchers looked at “nearly 372,000 residential mortgages originated in shale-gas fracking areas of Pennsylvania” and even found that “borrowers’ credit (FICO) scores showed a 40 percent increase amounting to an average score of 660” in regions of the state where shale development was taking place. The results led researchers to state:

“The research, the first to link fracking with mortgage performance, seems to debunk a widely held belief that fracking has devastating impacts on the mortgage market.”

Lily Shen, assistant professor of finance in the College of Business and lead researcher on the study said her findings demonstrate that nearby energy development creates extra incentives for homeowners to stay current on their mortgage. Also from the media release:

“When there’s discovery of a mineral resource, a property becomes more than a place to live. The mineral rights are tied to property ownership. If a person defaults on the mortgage and loses the property, they lose the mineral rights and the potential revenue they could have generated from those rights,” Shen said.

The results will come as more bad news for activist groups who charge that fracking leads to “mortgage problems” and “declining home values.” But as EID has reported time and time again those claims are simply not supported by the data.

For example, after activist groups made home values an issue of their now-failed 2016 ballot initiative campaign to ban fracking in Colorado, nonpartisan researchers with Ballotpedia looked at data from seven Colorado counties where oil and gas development has been taking place and found no indication that property values were harmed by fracking and even that “homes near oil and gas development in some cases have higher sales prices and values than homes without.” From the study:

“With several proposed 2016 ballot measures attempting to regulate where and how fracking occurs in ColoradoBallotpedia undertook a study and found no definitive evidence that fracking negatively impacted home values and sales across seven counties in Colorado in 2015.”

When activist groups made similar claims about Colorado home values in 2014, EID contacted officials in Weld County, home to almost 22,000 active oil and gas wells, to ask whether there was any evidence that fracking was impacting home values. In response to the claim Weld County Assessor Chris Woodruff said:

“We haven’t seen that proximity to oil and gas operations has caused a loss in value. We’re not seeing that.”

Colorado realtors have also come out against the claims, as evidenced in a statement from the Loveland-Berthoud Association of Realtors in opposition to a “ban fracking” initiative in Loveland. The Association did not mince words in their statement in opposition to the initiative:

“Many of the statements made by [anti-energy activists] have no factual basis and are simply allegations. There is no data that indicates fracking is harmful to human health, the environment or property values.”

National ban-fracking groups continue to maintain entire webpages dedicated to misleading claims on property values. The good news is the facts show exactly the opposite.

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