Tuesday, June 26, 2012

Foreclosing Lender's Lack Of Due Diligence May Leave It Holding The Bag On Environmentally Contaminated Collateral

From a recent story posted on JD Supra:

  • When the collateral has environmental contamination, the lender is faced with a take-it-or-leave-it dilemma, either of which poses significant financial risk.

  • Taking a property in foreclosure may result in the lender bearing substantial costs of cleanup and regulatory compliance just to sell in a market where property values may still be depressed. If the lender does not foreclose, then it loses its investment in the loan.

  • Often, however, it’s not clear that property is contaminated, which makes it imperative not to wait until the end of the foreclosure decision process to find out whether and how much cleanup might be necessary.

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