At this point, instead of continuing to pay the interest loan payments on properties that we will never be able to financially finish since the rehab loans will not cover the actual cost of the rehab, I wanted to know the ramifications of returning the properties to the loan servicer, deed in lieu.

If you convert it to a rental and sell later, you may owe capital gains tax + depreciation recapture, unless using a 1031 exchange to defer taxes by reinvesting in multifamily.Leveraging $100K in equity via HELOC or cash-out refinance can help fund the next deal, but ensure rental cash flow covers debt, expenses, and reserves.

It is investment banking, so the rules are much different than your "normal" lenders who offer mortgages or loans to cover a single or portfolio of collateral. 

I would look at it in terms of whether you can afford a worst case scenario where you're covering the deductible and have a credit line or cash to front the re-build cost and getting reimbursed from insurance afterwards.

The main factor is will rents cover the debt liability and can you sustain 3-4 months of no income to cover the debt? 

Take the toilet out without damaging it, put a sanitary cover over waste hole, put toilet on shower floor.

Simply put, just never had to, these 2 transactional tools have well covered 100% of situations. 

Yes you have insurance, but it may not cover everything.

I've argued for this and the powers-that-be do have a good argument that they are still active just in other ways, how to cover labor and actions during that, etc..

If their policy ever lapses or is canceled, they are automatically enrolled in my master policy and covered.