On a condo loan, the lender goes on the unit owner's HO-6 policy with the standard mortgagee clause, not on the HOA's master policy. Fannie Mae requires an HO-6 when the master policy leaves any interior or improvements uncovered or has a per-unit deductible. Lenders verify the master policy with a copy or certificate.
Condo closings involve two policies, two insurance agents, and an HOA. It's no surprise the mortgagee ends up in the wrong place or gets left off. This guide explains who insures what, where the lender's clause belongs, and what title, loan, and insurance teams need before closing. Most of the specific rules below come from Fannie Mae's Selling Guide, the most detailed public standard. Other investors and individual lenders may differ.
Definitions: master policy, HO-6, and walls-in
- Master property policy: the HOA's policy on the building and common elements. The HOA is the named insured.
- HO-6 (unit owner) policy: the owner's policy on the parts of the unit the master policy doesn't cover, often interior finishes and improvements, plus personal property and liability.
- "Walls-in" or "all-in" master coverage: master policies that cover some or all unit interiors. How much interior a master policy covers depends on the condo's legal documents and the policy.
- Per-unit deductible: a master policy deductible charged to the individual unit owner for a loss.
Where does the mortgagee go?
On the HO-6
Fannie Mae's B7-3-08 says that if a unit owner keeps an individual property policy, or one is required for interior coverage, "it must include the standard mortgagee clause." That's the same standard or union clause, without contribution, required on single-family homes. A loss payable clause instead isn't acceptable. The unit owners who hold title must be named insureds.
Not on the master policy
The same section says "a mortgagee clause naming Fannie Mae, the lender, or the servicer is not required for a master property insurance policy, an NFIP RCBAP, or equivalent master flood insurance policy." The master policy names the HOA as insured. If the condo documents allow, it can name an authorized representative such as the HOA's insurance trustee. Co-op master policies name the co-op corporation, and PUD master policies name the HOA.
When is an HO-6 required?
Under B7-3-04, the borrower must have a unit owner policy when:
- any part of the unit's interior or improvements is not covered by the master policy, or
- the master policy includes a per-unit deductible.
Requirements for the unit owner policy include:
| Requirement | Fannie Mae standard (B7-3-04) |
|---|---|
| Form | "Special" coverage form or equivalent |
| Required perils | Fire or lightning, explosion, windstorm (including named storms), hail, smoke, aircraft, vehicles, riot or civil commotion |
| Per-unit deductible perils | If the master policy has a per-unit deductible for a required peril, the HO-6 must cover that peril |
| Coverage amount | At least the greater of what's needed to restore uncovered interior/improvements, or the master policy's per-unit deductible |
| Loss settlement | Replacement cost |
| Maximum deductible | Greater of 5% of the coverage amount or $2,500 |
| Mortgagee clause | Standard mortgagee clause (B7-3-08) |
Fannie Mae also recommends that lenders encourage borrowers to work with an insurance professional to decide on coverage.
What evidence do lenders need for a condo closing?
B7-3-07 requires "a copy of the current master property insurance policy or a certificate of property insurance showing that the subject unit is covered." In practice, a condo closing usually needs:
- the master policy certificate, usually requested from the HOA's insurance agent or management company, which may list the lender as certificate holder;
- the HO-6 declarations page or binder showing the lender's mortgagee clause, loan number, coverage, and deductible; and
- if the building is in a flood zone, evidence of the master flood policy (RCBAP) and any required individual flood policy.
Being listed on a master policy certificate doesn't make the lender a mortgagee under the HO-6. The two documents serve different purposes.
Step by step: condo insurance for closing
- Order the master policy certificate early from the HOA's agent. Turnaround varies.
- Read what the master policy covers (bare walls, original specs, or walls-in) and whether there's a per-unit deductible.
- Size the HO-6 to cover uncovered interiors and improvements, and at least the per-unit deductible.
- Add the lender's exact mortgagee clause to the HO-6, with ISAOA/ATIMA wording, insurance address, and loan number.
- Name all titleholders on the HO-6.
- Check flood. For attached condos in an SFHA, Fannie Mae requires an RCBAP or equivalent on the unit's building (B7-3-06). If per-unit coverage falls short, the owner must carry a supplemental policy. See flood mortgagee clauses.
- Send both documents to the lender and title, and confirm the condition clears.
Common condo mistakes
- Putting the lender's clause on the master policy request and leaving it off the HO-6.
- Treating the master policy certificate as the borrower's proof of insurance.
- Writing an HO-6 for contents and liability only, when the lender needs interior building coverage.
- A deductible above the investor maximum.
- Leaving a co-owner off the named insured line.
How MortgageeClauses.com helps
The HO-6 needs the lender's exact clause, and condo closings rarely leave time to chase it. Search MortgageeClauses.com to find a lender's current mortgagee clause, ISAOA/ATIMA format, and insurance mailing address in one search. You'll see whether the record is Verified or Pending Verification, plus servicer contacts and verification portal links for after closing. Agents and closing teams can start a 30-day trial, no card required.
Key takeaways
- The lender's mortgagee clause belongs on the HO-6. A mortgagee clause isn't required on the HOA master policy.
- Fannie Mae requires an HO-6 when the master policy leaves interiors uncovered or has a per-unit deductible.
- HO-6 deductibles are capped at the greater of 5% of coverage or $2,500 under Fannie Mae's guide.
- Lenders need the master policy certificate and the HO-6 evidence.
- Basics: what a mortgagee clause is and ISAOA/ATIMA explained.
Sources
- Fannie Mae Selling Guide B7-3-04, Property Insurance Requirements for Individual Units in a Project Development
- Fannie Mae Selling Guide B7-3-08, Mortgagee Clause, Named Insured, and Notice of Cancellation Requirements
- Fannie Mae Selling Guide B7-3-07, Evidence of Property Insurance
- Fannie Mae Selling Guide B7-3-06, Flood Insurance Requirements for All Property Types
- Fannie Mae Selling Guide Chapter B7-3, Property and Flood Insurance
FAQ
Does the lender go on the condo master policy or the HO-6?
On the unit owner's HO-6 (individual) policy. Fannie Mae requires the standard mortgagee clause on a required unit owner policy and does not require a mortgagee clause naming the lender or servicer on the HOA's master property policy.
Is an HO-6 policy always required for a condo mortgage?
Not always. Under Fannie Mae's Selling Guide, the borrower needs a unit owner policy when any part of the unit's interior or improvements isn't covered by the master policy, or when the master policy has a per-unit deductible. Lenders may also have their own requirements.
Who is the named insured on a condo master policy?
The HOA. Fannie Mae requires the master property or flood policy to name the HOA, or, if the condo documents allow, an authorized representative such as its insurance trustee. Co-op master policies name the co-op corporation.
What proof of the master policy does the lender need?
Fannie Mae requires a copy of the current master policy or a certificate of insurance showing the subject unit is covered. Many closings use a master policy certificate ordered from the HOA's insurance agent.
What is the maximum HO-6 deductible Fannie Mae allows?
For required perils on a unit owner policy, the greater of 5% of the coverage amount or $2,500, per Selling Guide B7-3-04.