Concerns about mold and its potential effects on indoor air quality and property values appear to have taken a back seat to other real estate issues, but that doesn't mean that someone isn't thinking about.
For example, the Mortgage Bankers Association last week published an update of a white paper on the effects of mold in the commercial and multifamily realm, "to reflect the most current information on mold mitigation, standards for conducting mold assessments, legal issues and insurance issues."
Don Glitz, corporate insurance risk manager of Capmark Financial Group, explained that the update was "an attempt to eliminate the 'misinformation' that exists with regard to the mold issue."
The update, the bankers' group cautioned, is only a "snapshot," since, as with many environmental issues, changes in the way mold is viewed and handled can occur frequently with research.
The reason for the continued interest in mold by lenders is obvious. Mold and dampness can directly damage buildings and their contents, but there are other repercussions, including a reduction in cash flow through lost rents or rental value and expenditures for remediation costs.
When mold issues are uncovered in a building, whether residential or commercial, there is a perception that the structure has become unfit or unusable, and that can result in a loss of market value.
After Hurricane Katrina, for example, some real estate agents in areas of Louisiana and Mississippi were reporting that many buyers were pulling out of deals if they even minor exterior damage to homes that could result in mold issues.
In addition, as the MBA white paper, points out, there are costs of litigation with tenants, purchasers of property or persons who claim to have been injured.
The chief concern has been with black mold. While less common than other molds, this one is more dangerous to humans because, given the proper environmental conditions, it can create multiple toxic chemicals called mycotoxins. These toxic byproducts exist in the spores of the mold, as well as in the tiny fragments that can become airborne. Of particular concern is the threat that humans will inhale and ingest these toxic spores.
According to the Centers for Disease Control and Prevention, there are few case reports that toxic molds inside homes can cause unique or rare health conditions such as pulmonary hemorrhage or memory loss. A causal link between the presence of a toxic mold and these conditions has not been proved, the agency says.
For the last few years, insurance companies have become unwilling to write new policies and have been excluding coverage of mold from existing ones. Such coverage as is available is underwritten as part of a "stand-alone" environmental insurance policy. There has not been any significant increase in the availability of coverage for mold as more information on it has become available, according to the mortgage bankers team.
Air quality issues "also may act as a negative constraint on a lender's or servicer's decision to foreclose and resell, continue operations or abandon property," the mortgage bankers' group observed.
Even before Hurricanes Katrina and Rita, New Orleans' mold problems were out of control, owing to the region's humid climate. With so much standing water for so many weeks and months, and no way to dry things out quickly, "you're able to find just about every variety of it," said Frank Panico, who is an expert on flood and fire cleanup issues.
That's why the best course of action when mold or moisture is found is to take care of the problem quickly, the MBA said.
Avoidance or reduction of mold risks begins at the moment the first sketch for a new structure is put on paper and involves proper selection and use of professionals, contract terms, contractors, subcontractors, design and engineering professionals, materials and construction techniques, as well as ongoing inspection, documentation and a complete moisture-management assessment plan.
For existing buildings, mold cleanup first requires elimination of moisture that is fueling the mold growth. The next step is to conduct a detailed visual inspection of the affected area to ensure that the full extent of an outbreak is determined and additionally to demonstrate that an outbreak is in fact limited in scope or severity.
Mold and materials technology continue to become more effective. There are continuing developments in technology to detect hidden moisture as well as new or improved building materials that are immune to or resist mold attack.
This may lower remediation costs and increase confidence in the effectiveness of the cleanup work that has been done.