REO Property and Liability Insurance - The forgotten costs of foreclosure.

Education & Training with Mortgage Broker Compliance Consultants

With and ever increasing number of foreclosures in the market place, lenders are trying to contain costs that they incur in the whole foreclosure process.   Most people fail to realize the numerous costs involved with maintaining a portfolio of foreclosed properties.   One of these costs,  that can be significant with a large portfolio of properties, is Real Estate Owned property and liability insurance.  

Real Estate Owned (REO) Property Insurance provides lenders with physical damage for any portion of their portfolio of owned properties, foreclosed properties, and properties in the process of foreclosure. Coverage may also extend to properties held in trust for others.

You will find that most REO Property Insurance programs offer a wide variety of limits, deductibles and coverage options. and are generally customized to meet the specific coverage needs of the lending institution.  REO Property Insurance may be purchased on either a stated value or total insurable value and also  may be purchased on either a replacement cost or actual cash value basis; with or without co-insurance penalties.

REO Property Insurance coverage may be term, annual, monthly with various billing options.

Some other common optional coverage to basic REO products include:

  •     Broad Form or All Risk Commercial Perils
  •     Flood and Earthquake
  •     Demolition Expense
  •     Pollution Extraction and Removal
  •     Ordinance or Law
  •     Mine Subsidence
  •     Freeze, Discharge and Leakage
  •     Builders Risk
  •     Real Estate Owned Contents

There are many ways for lenders to keep the cost of this coverage down, through the diligent monitoring of their coverage amounts and the timely deletion of properties when they are sold.   Working with the right insurance agent and carrier who deal specifically with these products and understand the importance of good portfolio management, could reduce a lender's insurance costs by 20% and in some cases as much as 50%.