SAN ANTONIO - Lead paint may soon shape up as the biggest environmental-compliance issue.

"It will be the next major crisis," says Jerry Ayers, vice president of Wachovia Corp.

At issue is a government proposal that would require sellers of homes to disclose the lead content of any home built before 1978. That would cover some 57 million single-family homes.

The plan, put forth by the Department of Housing and Urban Development and the Environmental Protection Agency, leaves unclear whether lenders would be liable for getting rid of lead.

But Mr. Ayers is fearing the worst. Banks may soon be spending a lot of money cleaning up lead paint, he said last week at the American Bankers Association's national security and risk-management conference.

The proposal, unveiled in November, already has had a chilling effect on banking, Mr. Ayers said.

"Banks won't make loans on old homes," he said, adding that the plan could be especially detrimental to Community Reinvestment Act lending. That's because many CRA loans are for older properties.

While lenders would definitely be responsible for disclosing the amount of lead in a home, it is uncertain if they would have to perform tests themselves.

Charles Franklin, project manager at the Environmental Protection Agency, said the agencies would address that confusion in redrafting the rule.

The EPA and HUD are now in the process of reading the 200 comments that came in by the Jan. 3 deadline.

The agencies hope to issue a final rule on lead paint by the end of the summer or early fall, he said.

The rule was mandated by the Residential Lead-Based Hazard Reduction Act of 1992, which is designed to protect consumers from lead poisoning.

Because of the requirements of that law, the general elements of the proposal will remain the same, said Mr. Franklin.

Banks are almost sure to be saddled with new costs, said Wachovia's Mr. Ayers.

If a bank forecloses on a property, becoming its owner, the bank could be responsible for cleanup, he said.

Even if foreclosure never happens, banks still might have to pay to test homes for lead in order to prepare lead-content disclosures, Mr. Ayers said.

Lead is extremely difficult and expensive to remove, said Mr. Ayers, who compared it with another hazardous substance, asbestos.

"I don't think there's enough money out there to remediate lead," he said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.