As mortgage lenders become increasingly concerned about toxic-site liability, two small firms are attempting to provide early warning systems for environmental risk.

Environmental Data Resources, Birmingham, Mich., and Toxics Targeting, Ithaca, N.Y., both provide environmental risk management services to mortgage bankers and secondary investors.

Toxics Targeting maintains a data base of 13 types of government-reported toxic sites in the southern tier of New York, said Walter Hang, the company's president.

The company compiles local, state, and Federal data and provides clients with detailed maps and reports on sites up to a mile from a specified address.

Assessing Risk

Mortgage providers may elect to use Toxics Targeting at two important junctures, said Mr. Hang.

First, at the time the mortgage is underwritten, lenders may compel prospective homeowners to purchase a report as part of due diligence.

Second, and more important, some banks obtain environmental risk management reports if they are forced to take title because of default. If a report showed that the property was near a potentially hazardous site, a more thorough on-site investigation would be launched.

Such cautious behavior may be necessary because banks that hold title to seized properties for extended periods run the risk of being held to have engaged in management. If such a property includes a toxic waste site, the bank or holder of the title may become liable for the cost of cleanup, according to Mr. Hang.

Maps and Data

The company's services also are used by investment banks to check commercial and residential properties underlying pools of mortgage securities.

Environmental Data Resources provides a similar service on a nationwide basis.

The company offers to lenders and secondary-market professionals the EDR-Radius Map, a package of maps and environmental risk data gathered from public sources. The service is available for $200 to $300.

The company, along with minority investor Dun & Bradstreet Corp., plans to roll out a software product in the fall that will be able to be used as a screening tool for large numbers of loans. The service will provide users, typically investment banks screening secondary pools, with a summary of information.

Financial Appraisals

Bold Property Information System of New York City also sells risk containment information to the mortgage industry.

The company specializes in guiding clients through the jungle of the New York cooperative and condominium market.

Bold provides about 750 appraisal reports a month on co-op and condominium financial risk to banks, said Melissa Chefec, director of marketing at Bold. Bold provides reports only on property in the New York City area.

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