EAG Cites Mold Threat to Lenders, CMBS

In the wake of hurricanes Katrina and Rita, the spread of mold could have consequences for mortgage lenders and could result in downgrades for commercial mortgage-backed securities, according to Environmental Assurance Group, Hartford, Conn."Since insurers recently excluded mold coverage on policies for homeowners and businesses, the fate of exposed parties -- mortgage lenders, commercial mortgage-backed securities underwriters, and investors -- has been an open question," said Charles Perry, a principal at EAG. "The recent hurricanes have brought the financially catastrophic aspect of the mold issue to the forefront." According to EAG, mold exclusions could allow insurers to avoid billions of dollars in claims on Katrina and Rita, as well as damages down the line.