Monitoring Collateral Over Life-of-Loan

When the FDIC updated its Guidelines for an Environmental Risk Program in 2006, it recommended that lenders put in place a comprehensive program for conducting environmental due diligence during the lending process. This includes training staff, developing policies, procedure and other safeguards.

While most lenders have adopted the FDIC guidelines, many have been challenged with one important component – the monitoring of collateral for environmental over the life of the loan. Here is FDIC’s recommendation:
“The environmental risk assessment should continue during the life of the loan by monitoring the borrower and the real property collateral for potential environmental concerns. The institution should be aware of changes in the business activities of the borrower that result in a significant increased risk of environmental liability associated with the real property collateral. If there is a potential for environmental contamination to adversely affect the value of the collateral, the institution might exercise its rights under the loan to require the borrower to resolve the environmental condition and take those actions that are reasonably necessary to protect the value of the real property.” FDIC FIL-98-2006

While on-going, long-term monitoring of a portfolio of properties may seem like a daunting task, EDR’s Lender Portal makes it easy. Quarterly property monitoring reports, available through the EDR Lender Portal, identify any environmental changes that may affect properties held as collateral.