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Banks And Lenders Are Starting to Find Out About the EPA RRP Rule Too

Posted by Shawn McCadden on Thu, Sep 30, 2010 @ 08:00 AM

Banks And Other Lenders Are Starting to Find Out About the EPA RRP Rule Too.

Foreclosure signBanks have started to figure out that the costs and liabilities related to the EPA RRP rule can dramatically increase their costs and risks.  Banks that own foreclosed properties have quickly discovered the additional costs they will incur when repairing and or renovating these properties just so they can sell them.  Under the RRP rule, landlords need to become certified firms and use certified renovators when working on their properties.  Banks who take possession of pre-1978 properties need to do the same and or only hire certified firms to perform the work for them.  As a result of the RRP rule, many pre-1978 foreclosed homes are now worth less than they were valued prior to the April 22, 2010 date the new EPA RRP rule took effect. 

Upside down mortgageBanks are also more likely to end up with additional foreclosed properties due to the RRP rule.  For struggling pre-1978 homeowners and investors, perhaps already upside-down on their mortgages, the additional repair and maintenance costs related to the EPA RRP rule may be just one more reason to justify letting their properties go to foreclosure.  Finding out about the potential additional drop in equity value in the property due to the EPA RRP rule may become a second reason to let upside down properties go to foreclosure.

Approved or RejectedAs mentioned above, banks have already started to become aware of the EPA RRP rule due to foreclosures.  They are also using this knowledge when considering loans.  If loaning money to home buyers for purchases and or to property owners for renovations, banks will likely want to know if a pre-1978 property contains lead and if it does how it might affect the value of the home.  A home needing significant repairs or maintenance after purchase will likely have a much lower value if the work will fall under the EPA RRP rule.  Such scenarios might have a few different effects ranging from requiring more money down, higher interest rates, lower appraised value of the property as compared to the selling price and or ultimately denying to loan money on the property. 

Topics: Effects of the RRP Rule, Shawn's Predictions