Frequently Asked Questions

What is REO Builders Risk Insurance?

REO Builders Risk Insurance is an automated insurance program designed to cover partially completed homes that are “Real Estate Owned” (REO) by a lender following foreclosure. Many lender-owned REO blanket property insurance policies will not provide coverage for a partially completed home. REO Builders Risk Insurance is tailored builder’s risk insurance coverage that will provide comprehensive coverage, including theft and vandalism on partially completed homes. The coverage is provided up to 6 months to allow the lender time to consider their options and to initiate a workout plan for the property.

How does REO Builders Risk Insurance work?

REO Builders Risk Insurance begins with comprehensive blanket builder’s risk insurance policy owned by the lending institution. The lender uses our patented software to initiate coverage on partially completed foreclosed homes. Our software allows the lender to generate a Certificate of Property Insurance detailing the coverage provided each insured loan. The lender pre-pays for 6 months coverage, however return premiums are pro-rated on a monthly basis and refunded to the lender for early cancellation of coverage. Coverage is written on a Replacement Cost basis (without deduction for depreciation) and is subject to a $2,500 per occurrence deductible.

How is REO Builders Risk Insurance implemented at a lending institution?

REO Builders Risk Insurance is one of a suite of coverages available to lenders as part of Construction-to-Perm (C2P) Insurance. REO Builders Risk may only be provided to lenders offering the C2P Insurance program. The program is initiated by completing a one page application for the blanket policy. There are no setup fees or premium deposits for the policy. Premium costs are incurred as partially completed foreclosed homes are added to the blanket policy. The entire implementation process can be accomplished in a matter of hours.

How does the premium payment and return premium work with REO Builders Risk?

REO Builders Risk is an automated system that allows the lender to order coverage online and to print Certificates of Property Coverage for each property insured. When a foreclosed home is submitted for coverage, the full 6 month premium charge is added to the lender’s monthly statement. At the end of each month the lender receives an emailed statement for all the foreclosed property insured during the month. The lender is given 10 days to review the statement and to contact us with any discrepancies. On the 11th day of each month we withdraw the total premiums for the prior month’s statement from a designated account at the insured bank. When insured homes are sold, the lender uses the same online system to cancel REO Builders Risk coverage on that loan. We scan our database of insured properties 3 times each month to identify which homes have been cancelled since the last scan. Premiums are earned for each month or portion of a month that the foreclosed property was insured. The unearned premiums are returned to the lender within 2 weeks of the cancellation request.

Is REO Builders Risk Insurance only for residential construction?

REO Builders Risk Insurance can be written for both commercial and residential construction projects up to $500,000 per structure. The minimum deductible is $2,500.