The Environmental Assessment Process for HUD 223(f) Loans

In order to apply for a HUD 223(f) loan, you will need to have all your third-party reports ready before HUD can approve your loan application. One of the most important third-party reports you'll need is an Environmental Assessment. This report ensures the property is following all state, local, and federal environmental laws, and that it does not pose any threat to the environment, current residents, future residents, or to the surrounding community. In particular, Environmental Assessments will make sure that a property does not contain: 

  • Toxic chemicals

  • Toxic gasses

  • Contamination

  • Radioactive substances

  • Other hazardous materials

Phase I Environmental Assessments: What You Need to Know 

Most properties require a Phase I Environmental Site Assessment. The standards for this report are set by the EPA and are heavily based on standards created by the American Society for Testing and Materials (ASTM). A Phase I Assessment typically takes around a month, and examines a property for: 

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  • Pesticides

  • Dangerous chemicals

  • Petroleum products

  • Dangerous structural components

  • Mold

  • Radon

  • Asbestos

  • Lead-based paints

In addition, Phase I Assessments often involve: 

  • Interviewing past owners, tenants, site managers, neighbors and others to determine potential risks

  • Looking at city and/or county records to check for land permits and potential past violations

  • Conducting research to find past environmental liens

  • Determining whether neighboring properties could pose a risk to the property being assessed

Phase I Assessments only remain fully valid for a 6-month period, though Phase I Assessments completed in the last 12 months can often make the new assessment process faster, saving time and money. 

Phase II Environmental Assessments: Furthering the Investigation

If the Phase I Environmental Assessment reveals any serious issues, or if the property has a previous history of contamination, the borrower may need to get a Phase II Environmental Assessment. Phase II Assessments involve taking physical samples. As a result, they may take longer and be more expensive than Phase I Assessments. At the same time, this completely depends on the extent of the potential contamination. Phase II Environmental Assessments often involve: 

  • Soil testing

  • Taking indoor air samples

  • Taking lead, mold, and asbestos samples

  • Groundwater testing

  • Installing monitoring wells