Mold Resurfaces as U.S. CMBS Issue In Wake of Katrina

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September 19, 2005 12:34 PM US Eastern Timezone

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Fitch: Mold Resurfaces as U.S. CMBS Issue In Wake of Katrina

NEW YORK--(BUSINESS WIRE)--Sept. 19, 2005--While the existence of

mold as an environmental problem is not a new issue, extensive

flooding in the New Orleans and the Gulf Coast brought on by

Hurricane Katrina brings the problem back into focus for the U.S.

commercial mortgage-backed securities marketplace, according to

Fitch Ratings.

Certain kinds of mold contamination can quickly lead to the shutting

down of income-producing properties, and while hotel and multifamily

properties are most vulnerable to those actions, office properties

can also be impacted, according to Fitch Senior Director

O'Rourke. 'The tearing down of a major New York City office building

in the wake of the World Trade Center attacks, is largely due to

mold contamination,' said O'Rourke.

'CMBS loan originators should encourage borrowers to purchase

additional insurance to cover mold claims in any region where

additional coverage is available,' said O'Rourke.

A potential problem for borrowers, however, may be in finding an

insurer that will provide mold coverage. The awarding of millions of

dollars in lawsuits settling mold-related claims dramatically

thinned the insurer playing field in recent years. Most insurers

eliminated mold coverage from their standard policies, while many

others stopped doing business in states with damp, warm climates

where high rates of mold may be detected, like the ones affected by

Katrina.

Fitch notes that the limited availability of insurance makes mold

site assessment procedures even more critical in CMBS

transactions. 'Mold exclusions in property and casualty policies are

an added burden on site inspections, so the need for thoroughness

and expertise on the part of the consultants is obvious,' said

O'Rourke.

'Mold: Katrina's Lingering Legacy' is available on the Fitch Ratings

web site at www.fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are

available on the agency's public site, www.fitchratings.com.

Published ratings, criteria and methodologies are available from

this site, at all times. Fitch's code of conduct, confidentiality,

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relevant policies and procedures are also available from the 'Code

of Conduct' section of this site.

Contacts

Fitch Ratings, New York

O'Rourke, 212-908-0711

Sandro Scenga, 212-908-0278 (Media Relations)