Lenders are concerned that by foreclosing on a property they will become liable for contamination. The EPA lender liability policy discussed above does not completely resolve this issue. The amendments to the state Superfund law provide that a lender does not become liable when it forecloses, provided that it undertakes certain activities and is able to dispose of the property within five years after foreclosure. In general, banks remain uncertain whether they can foreclose on a contaminated property without becoming liable for cleanup costs under the Superfund laws. Impaired collateral value.
Banks are concerned about the impact contamination has upon a property's value.
The process of determining the cost of cleanup or the impact contamination has on the property's value, is time consuming, difficult and uncertain. Even if lenders could be guaranteed legal protection from liability, they still could be left with properties of diminished value including some properties with negative values. Banks remain concerned about contamination and, other things being equal, would prefer to make loans on properties not impacted by contamination. In response to significant losses that banks have experienced on contaminated properties, most banks have instituted environmental risk programs with detailed requirements for the investigation and review of contamination. Complying with these requirements can be prohibitively expensive.