For the first thirty seconds, I would repeat "do it!"
After that I would tell them to educate the loan officers on why Phase Is and other assessments needed to be done, how to read and understand them, and how they shouldn't be seen as an obstacle to closing a deal. Making a standard policy is one thing, but the people who have to live by it should understand the purpose.
Having done it for 16 years (and with a complete understanding of banking/master in banking law) - I would say "take a comprehensiver review with the considerations of the recommendations of the FDIC."
The FDIC recommends more than simply conducting and reviewing a Phase I - which is ONLY risk identification. A bank must by FDIC standards implement risk management - far from simply risk identification.
As part of risk management (or Enterprise Risk Management) there are ways to capitalize on environmentally challenging properties rather than to be 'risk adverse.' The bank needs to understand the local and state regulations much more than federal (i.e. CERCLA / ASTM). I would also caution lenders even on residential lending and environmental risk.
Part of risk management - is considering risk transfer. Numerous "would be" deals are "killed" by Phase II environmental reports. Under regulatory scrutiny "Safe and Sound" lending must consider insurance options to TRANSFER risk - rather than retain it.
Hire a good consultant. Don’t give into temptation to hire the low bidder. If you do, make sure you have an attorney review the report to make sure it is adequate.
The prior comments are great. One way to narrow it down would be to advise lenders to value environmental due diligence. Valuing environmental due diligence consists of educating the in-house review team, as well as account officers as Tom suggests, about environmental liabilities and why due diligence is important. Your consultants and attorneys can help with this through webinar trainings or brown bag lunches. Valuing environmental due diligence also consists of hiring good consultants, as Larry suggests, and choosing firms based on quality and expertise rather than price. It is also important to provide adequate time to your consultants within the overall underwriting process and to disclose all prior environmental documents to the consultant. Overall, the key is viewing environmental due diligence as an important tool in the due diligence process, rather than a roadblock.
I'd advise the banker to discuss with his senior risk management staff exactly what the bank's risk management strategy is (environmental and otherwise) and to communicate that strategy to its due-diligence advisors - environmental and otherwise. Unless its consulting staff is made completely aware of its risk management strategy, the bank can never be certain that its goals can be met.
Particularly for smaller (local and regional) banks, risk appetite and prioritization can vary widely, and even for a given bank risk acceptance can vary with market conditions. Unless I know what the risk-tolerance-of-the-day is for my bank client, I can't do a good job of identifying risky conditions (beyond pure REC) that they may be interested in.
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For the first thirty seconds, I would repeat "do it!"
After that I would tell them to educate the loan officers on why Phase Is and other assessments needed to be done, how to read and understand them, and how they shouldn't be seen as an obstacle to closing a deal. Making a standard policy is one thing, but the people who have to live by it should understand the purpose.
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Having done it for 16 years (and with a complete understanding of banking/master in banking law) - I would say "take a comprehensiver review with the considerations of the recommendations of the FDIC."
The FDIC recommends more than simply conducting and reviewing a Phase I - which is ONLY risk identification. A bank must by FDIC standards implement risk management - far from simply risk identification.
As part of risk management (or Enterprise Risk Management) there are ways to capitalize on environmentally challenging properties rather than to be 'risk adverse.' The bank needs to understand the local and state regulations much more than federal (i.e. CERCLA / ASTM). I would also caution lenders even on residential lending and environmental risk.
Part of risk management - is considering risk transfer. Numerous "would be" deals are "killed" by Phase II environmental reports. Under regulatory scrutiny "Safe and Sound" lending must consider insurance options to TRANSFER risk - rather than retain it.
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Hire a good consultant. Don’t give into temptation to hire the low bidder. If you do, make sure you have an attorney review the report to make sure it is adequate.
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The prior comments are great. One way to narrow it down would be to advise lenders to value environmental due diligence. Valuing environmental due diligence consists of educating the in-house review team, as well as account officers as Tom suggests, about environmental liabilities and why due diligence is important. Your consultants and attorneys can help with this through webinar trainings or brown bag lunches. Valuing environmental due diligence also consists of hiring good consultants, as Larry suggests, and choosing firms based on quality and expertise rather than price. It is also important to provide adequate time to your consultants within the overall underwriting process and to disclose all prior environmental documents to the consultant. Overall, the key is viewing environmental due diligence as an important tool in the due diligence process, rather than a roadblock.
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I'd advise the banker to discuss with his senior risk management staff exactly what the bank's risk management strategy is (environmental and otherwise) and to communicate that strategy to its due-diligence advisors - environmental and otherwise. Unless its consulting staff is made completely aware of its risk management strategy, the bank can never be certain that its goals can be met.
Particularly for smaller (local and regional) banks, risk appetite and prioritization can vary widely, and even for a given bank risk acceptance can vary with market conditions. Unless I know what the risk-tolerance-of-the-day is for my bank client, I can't do a good job of identifying risky conditions (beyond pure REC) that they may be interested in.
Great question.
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