Originally Posted By: gromicko
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(September 16, 2004) – With the mortgage industry’s exposure to mold risks on the rise, lenders are faced with the task of modifying loan documentation to stem the financial impact on commercial real estate lenders’ portfolios.
Under the revised standard, mold-resistant building products in new construction and in rehabbed and remediated properties would become the rule. However, there are advantages and drawbacks to the stipulation that new construction loans depend on the interior use of paperless drywall. One upside for commercial real estate lenders is that they are protected from the rising costs associated with mold remediation.
Lenders' loan portfolios are also covered, so if a borrower defaults on a property that is infested, the loan may be declared "nonperforming." Also, lenders will gain long-term protection.
The downside to the revised rule is that paperless building products cost more than old-fashioned wallboard, and there is a risk that the borrower will seek a loan from another lender.
Source: RMA Journal (08/01/04); Perry Jr., Charles L.
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