MADISON, Wis.-As a seemingly never-ending wave of residential foreclosures sweeps the nation, a second wave is already starting to be felt in the commercial sector, which is why CUNA Mutual Group has expanded its foreclosure coverage.
To protect credit unions from commercial foreclosures CUNA Mutual is offering insurance products designed to keep CUs whole if businesses or investment properties go under. The financial services and insurance company is trying to get ahead of a possible impending tidal wave in that segment, which could wreak just as much damage as home foreclosures.
"We have been watching the economic downturn and we've seen an increase in residential foreclosures over the last six months," said Michael Harty, director of Credit Union Protection Product Distribution for CUNA Mutual. "We personally in our brokerage unit have [also] seen an increase in commercial foreclosures, but it does lag behind the residential. We're seeing how the commercial tracks where the problem states are such as California, Florida, Ohio and Michigan where a lot of the big industries are being affected."
CUNA Mutual's Bond policy protects CUs against coverage gaps for residential foreclosure, but the new stand-alone product, which CUNA Mutual began offering in Q4 2008, covers any and all businesses or investment properties such as apartment complexes, residential developmental properties, restaurants, offices, manufacturing plants or even campgrounds and mobile home parks. The commercial insurance also can cover the property, including on-site equipment and/or the actual business liability and may be purchased at nearly any point before or after a member business loan is made.
Harty said CUs should consider purchasing foreclosure insurance when it files a foreclosure complaint, evicts occupants, purchases, or acquires property through foreclosure, repossession or deed in lieu.
In a number of cases of residential foreclosure, financial institutions find themselves owning properties that have been stripped clean of their major appliances, paneling, plumbing and even wiring. So among package options in CUNA Mutual's new commercial insurance a protection against basic and special perils is included.
"Our goal is to continue to look out for the best interest of our credit unions and to make sure they have the products they need so they can sleep better at night," said Harty.
The firm began to offer electronic applications about a month ago; with that system credit unions can apply for insurance and receive quotes back in about three days. Though it's too early to crunch numbers, the move to an Internet-based application system is generating increased interest, he said.
