The company's fall into administration is the first for an insurer since the collapse of Independent Insurance in 2001.
Exchange's bonds were used by developers such as Taylor Wimpey and Crosby Lend Lease to allow house buyers to avoid putting down cash deposits on new homes, instead paying entirely on completion. This effectively allowed purchasers to sell a new-build property on at a profit before completion without spending any money - so called 'flipping'.
Defaulting purchasers resulted in Exchange being forced to pay the deposits to vendors, leading to a potential maximum exposure of up to £30 million.
"The directors hope that a refinancing of the business will be possible," said joint administrator Neil Mather of Begbies Traynor. "The protection of administration has been sought while the new investor awaits clearance for its proposals from the Financial Services Authority."