I read all of the above posts and there seems to be a little misunderstanding of what an umbrella policy is.

Too many misunderstandings and misconceptions here.

Or did I misunderstand that comment?

In my area, I know of a couple listing agents/brokers who basically lost their REO business by doing this, and the rest aren't going to risk their livelihood helping investors make more money.Perhaps you all are misunderstanding how it works/the terms being used to explain the process.

When I've answered those questions they span a long time, so I'd be inclined to suspect the first.But perhaps I misunderstand the issue your applicant is having.

Or am I misunderstanding something here?

That minimizes (hopefully) a lot of misunderstandings. 

You couldn't get very far with that misunderstanding of how interest works.  

Is this true or did I misunderstand?

Perhaps I misunderstand, and the other investor did in fact have a contract.