September 30, 2002—In recent months, high-profile mold-related damage awards have resulted in a change in how insurers price mold-related risks and has led them to reduce their exposure to mold-related claims. For investors, the discovery of certain kinds of mold can present significant risks to the property income stream if income-producing portions of the property have to be shut down.
In reviewing Phase I environmental site inspection reports for commercial mortgage-backed securitizations and large loan transactions, Fitch Ratings expects to see specific references to mold inspections and specific recommendations from the consultants outlining appropriate actions required to correct any suspected problems.
Additionally, Fitch continues to recognize only one type of environmental insurance policy—a lender full loan balance policy—as a justifiable substitute for Phase I investigations in small-loan conduit programs.
For the full report, “Are Phase 1’s Getting Moldy? Clarifying Phase 1 Requirements and Environmental Insurance Expectations,” contact Fitch.
