No Option When Facing Hazards
If confronted with environmental problems, such as mold infestation, servicers have no option but to call in a specialized firm.
BY ROBERT W. CARTER JR.
Strange, foul odors. Airborne particulates that are potentially hazardous to one's health. Not the type of stuff one usually associates with residential mortgage servicing. Such environmental problems, however, can become a servicing matter.
A residential property that requires environmental services can be viewed as just one more
annoying nuisance by a default loan servicer. But on closer examination, it is very difficult and, in many instances, much more demanding. Unlike lawn cuts, lock changes or property board-ups, environmental issues can be especially annoying, since corrective action can involve specialized personnel, and may involve a local, state and/or federal governmental oversight agency.
With disclosure laws firmly in place, ignoring an environmental problem is not an option for servicers of a property in foreclosure. Alternatives are usually restricted to discounting the sale of a real estate-owned (REO) property "as-is", or performing the necessary corrective action. Environmental service companies cannot only conduct the required clean-up of the hazardous conditions, but must also do a property inspection to evaluate the extent of the problem and supply an estimate for the clean-up.
The issue of environmental hazards and clean-ups is one that servicers have had to increasingly address, particularly because of disclosure legislation in a majority of the states. The essence of these property condition disclosure laws is if a mortgagor or property owner knows of an environmental problem, it must be disclosed to real estate agents and potential buyers.
The bottom line is that servicers are, in most cases, required to address an environmental
problem before going forward with the disposition of a foreclosed property.
The route that is take is usually based on economics, unless the "as-is" sale is prohibited by an oversight agency. But, there are certain situations that mandates an immediate corrective action to limit the scope and severity of the potential hazard.
Environmental problems can potentially involve health hazards not confined to a specific
property, including groundwater contamination from a leaking home heating fuel oil storage tank, potable well water contamination propagating through a neighborhood and unsecured containers of hazardous materials that are left on the property.
Not taking responsive corrective action can result in negative media coverage, as well as fines and other legal action.
Environmental problems that can pose serious repercussions if not addressed by servicers can include:
- lead-based paint,
- leaking underground and above-ground storage tanks for home heating fuel oil,
- friable asbestos containing materials, such as insulation wrap,
- containers with hazardous and non-hazardous materials (pesticides, waste oil, solvents, etc.),
- car parts,
- tires,
- failed septic systems,
- contaminated potable wells and
- mold infestation, the latest issue spotlighted by recent media attention.
There are also certain environmental hazards that for lack of a better label can be referred to as "crime-related hazards." During the past two years, Environmental Evaluation Group (EEG), the company I work for, has been involved with the clean-up of residential methamphetamine labs. These are illegal methamphetamine manufacturing operations which are established in a house or other residence. Methamphetamine, a stimulant that is sold illegally on the streets as "Speed," is certainly the kind of problem one associates with law enforcement - not loan servicing.
However, when police raid a residential property, make arrests, collect evidence and then
order the premise to be cleaned-up, it requires special handling and disposal because of the chemicals that are used, some of which can be volatile.
Based on EEG's experience, servicers don't know what to do in this type of situation and it is not something that a maintenance contractor can become involved in, due to insurance liabilities and lack of expertise.
One hazard, mold infestation, ironically may have the appearance of a recent phenomenon. But instead, it is probably one of the oldest "environmental" conditions, probably pre-dating man's own existence. Because it has received considerable media coverage during the past several months, a closer look at mold infestation and mold-related problems is warranted.
Mold and mildew are common names for fungi. Although molds can be found on plants, foods, dry leaves and other organic debris, most outdoor molds live on plant leaves, and the predominant species of this mold-type tend to be the same worldwide. Most molds use non-living organic matter for growth, and molds are essential to the breakdown of dead organic materials.
Spores
Molds reproduce primarily by the production of spores, and mold spores can survive in the
environment for varying lengths of time Ð from weeks to years. Outdoor air is probably the single largest source for molds found indoors.
All molds have specific requirements for nutrients, moisture, and temperature, but water is the single most important factor in determining if molds will survive, grow and populate indoors. Mold can always be found indoors, but are generally not a concern unless conditions exist that allow for significant mold growth - such as flooding, plumbing failures and roof/structure leaks. Also, the mold growth can occur in visible locations and interstitial areas, such as between walls, under carpeting, and so forth.
Visible mold growth associated with a history of water damage usually indicates a significant amount of mold in interstitial areas. Conditions that facilitate mold growth indoors include moisture and temperatures between 40 and 100 degrees F.
People are exposed to molds in outdoor air on a daily basis, usually with no side effects. The
problem is that most people tend to spend up to 93% of their time indoors, according to the U.S. Environmental Protection Agency 1989 Report to Congress on Indoor Air Quality. When indoor environments include a significant amount of mold, our bodies do not get a chance to cycle or clear out the fungi.
Prolonged exposure to mold can result in health problems, ranging from simple allergy-type
symptoms to severe health effects attributed more to mycotoxin-producing fungi, such as stachybotrys, aspergillus, fusarium, and some species of penicillium. All molds produce mycotoxins, which areassociated with growth and the digestion of food sources, and they can enter the body via inhalation, skin absorption and/or ingestion. Molds that produce mycotoxins toxic to humans, referred to as toxigenic molds, are considered highly toxic because it is believed that only minute quantities are sufficient to cause serious health effects.
The most common method of identifying the presence of mold is usually visual or through smell, characterized by earthy, musty or "moldy" odors. Sampling for molds requires trained personnel with proper, specialized sampling equipment. Samples are submitted to a certified laboratory for analysis, which can commonly include species identification and total indoor counts relative to sampled outdoor counts.
Elimination of mold conditions, or mold remediation and abatement, includes the initial identification of possible moisture and water source. Failure to correct the source of moisture will result in continued mold infestation. Once the moisture source has been identified and corrected, mold remediation consists of sealing and placing designated work areas under full negative air containment, with workers wearing special protective equipment. Known and suspected impacted porous components (sheetrock, wood, carpeting, carpet padding, insulation and so forth) should be removed for proper offsite disposal. Non-porous components should be disinfected.
Disinfecting solutions usually consist of a bleach or ethanol solution. Upon completion of an area, all surfaces should be HEPA (high efficient particle air) vacuumed. Post-remediation mold sampling and laboratory analysis is required to assure acceptable conditions have been met. The elimination of mold is not an exact science, and, therefore, it may take two or three remediationiterations to ascertain acceptable conditions.
If a property is suspected of having a mold problem, or if a property has been cited as a health hazard due to mold conditions, it is recommended that servicers contact an environmental consulting firm to verify conditions and assist with developing an abatement strategy.
Robert W. Carter Jr. is vice president, nationwide operations, of Environmental Evaluation Group (EEG), a full service environmental consulting firm with offices in Toms River, N.J., Philadelphia and Fairfax, Va. He can be reached at (888) 853-9600, by fax at (703) 383-1340 or e-mail, eegfairfax@erols.com.
This article was previously published in the February 2001 Issue of Servicing Management
