Environmental contamination can threaten loan repayment. The presence of contamination will affect the value of the property and the ability of the borrower to repay the loan. The measure of the impact will depend on the nature, time, and cost associated with the problem.
Failing to observe conditions at the asset can lead to unexpected problems for the lender. The Office of the Comptroller of the Currency (OCC) has published a revised version of the Commercial Real Estate Handbook in 2013. The requirements for the banks’ monitorying of environmental risk have changed significantly. I’m going to discuss some key points from the OCC CRE Handbook’s advisory to banks dealing with contaminated collateral.
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