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Previous Issues
Issue 30: Loan Sale Premiums Hold Steady in November

Issue 29: Proper Risk Management Protection and Credit Worthiness

Issue 28: BoeFly Helps Veterans With Disabilities Connect With Lenders to Obtain Small Business Loans

Issue 27: Loan Sale Premiums Level off in October

Issue 26: SBA Secondary Market changes - Warranty Period and Premiums on New Larger Loans

Issue 25: BoeFly Surpasses the $1 Billion Transaction Mark

Issue 24: Loan Sale Premiums Continue Climb in September

Issue 23: Robert Tannenhauser, CEO of BoeFly, Interviewed by Michael McKee on Bloomberg Radio

Issue 22: Lender Optimism is up While Anxiously Awaiting the Small Business Jobs Bill

Issue 21: Loan Sale Premiums Blast to Record Highs in August

Issue 20: Title Insurance- the Lender's Perspective

Issue 19: Condemnation and Mortgage Lender's Rights

Issue 18: Long-Term Deals Continue Record Climb; Short-Term Deals Fade

Issue 17: Congressman Walt Minnick (D-Idaho) Gets It

Issue 16: Deeds and Forms of Ownership

Issue 15: SBA Loan Sale Premiums Hit Record High in June

Issue 14: What You Need to Know About Property Insurance

Issue 13: SBA Fixed Interest Rate Loans are an Important Product to have at the Ready

Issue 12: 504 Guaranteed Pool Program Summary and Survey Results

Issue 11: Loan Sale Premiums Surge to Record Highs in May

Issue 10: Environmental Risk for Lending Opportunities

Issue 9: How To Take Advantage of the First Lien Position 504 Loan Pool Guarantee Program

Issue 8: Investors Remain for SBA Loans

Issue 7: Retirement Funds for an Equity Injection - Selecting the Right Plan Provider

Issue 6: Why Outsourcing Environmental Risk Management makes Cents for Lenders

Issue 5: Loan Monitoring: Comfort in a Crisis

Issue 4: BoeFly Case Study: The economics of selling SBA guaranteed loans

Issue 3: BoeFly Lender Survey Results Q1 2010

Issue 2: Loan Sale Premiums Rally in Q1

Issue 1: The Importance of Efficiency in Secondary Markets

Why Outsourcing Environmental Risk Management makes Cents for Lenders

By BoeFly Member Derek Ezovski, President, Outsourced Risk Management Solutions, LLC


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For financial institutions of all sizes, the risks related to environmental exposures in their real estate portfolios have always been a concern. However, due to the recent commercial real estate meltdown and the increased attention by regulators and examiners, there is an even stronger case to make sure that environmental and other collateral due diligence policies and procedures are managed correctly.


In practice, the larger institutions have managed this risk by creating internal divisions to oversee environmental issues on the lender's behalf - and they still do. However, community and regional banks and real estate firms are typically not able to justify having a department like this due to the lower volume of real estate that flows through their banks, as well as a desire to keep their fixed costs and headcount down. However, this does not alleviate the need. Therefore, many lenders are now looking to establish virtual risk management departments with outside firms to make sure that they are adequately protected and that they have access to the best solutions for their institution.


By outsourcing this environmental risk management function, lenders gain the following benefits: increased compliance and comprehension of regulatory requirements, lower fixed costs, less time spent on the procurement and review process by loan officers, access to experts in their field and access to a proprietary, established networks of providers. Lenders can now focus more time on their core competencies, including developing more business opportunities rather than tracking down reports from their vendors.


But not all firms are the same. What does this mean? There are very few companies in the industry that truly work as a dedicated risk consultant to the lender. The more typical scenario is as a vendor that offers specific services (i.e. Phase I, remediation, asbestos removal, environmental data, etc.) to the lender. By contrast, the "outsourced" risk management department would actually procure products and services on behalf of the lenders from outside firms. While it might appear to be a narrow difference, in practice it is an entirely different business model since the providers are not employees of the outsourced company which removes the conflict of interest. Other factors to consider when evaluating outsourcing your environmental program to a firm are:


  • A solid understanding of both the environmental and the business aspects, of the loan process.
  • Familiarity with current government regulations and relationships within those organizations.
  • A good understanding of the Small Business Administration (SBA) SOP 50-10 (5b);
  • Established relationships with proven vendors to provide the most cost effective and proven products and services;
  • Experience as an internal environmental risk officer within a financial institution to better understand the dynamics involved is extremely helpful

The bottom line (which always needs to be a priority) is that by outsourcing their environmental risk management process, lenders are now able to free themselves from the often difficult, tedious and high liability process of environmental due diligence. Instead, they can focus on what they enjoy and profit from the most - building relationships and their businesses.


Derek Ezovski is the President of Outsourced Risk Management Solutions LLC (ORMS). ORMS was founded to serve as an extension of lenders and real estate professionals nationwide to help them manage their property risks in a simple and cost-effective manner. Prior to founding ORMS, Derek was the Managing Director of the Commercial Due Diligence group at Environmental Data Resources where he was responsible for the developing and overseeing the strategy for their lender and environmental consultant divisions. In addition, Derek was the Environmental Risk Officer at Fleet Bank's Small Business Services division. Derek can be reached at 877.407.ORMS or via email at dezovski@orms.com.