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What Is a Mortgagee Clause?

A mortgagee clause is the part of a property insurance policy that names the lender (or its loan servicer) as a party entitled to be paid for damage to the mortgaged building and to be told before the policy is canceled. Under a standard mortgage clause, the lender's right to payment survives even when the borrower's own claim is denied for something the borrower did.

Last reviewed 2026-10-03 · Our methodology

This guide explains what the clause does, what goes into it, and where it tends to go wrong. Companion guides cover the abbreviations (ISAOA and ATIMA explained), adding or changing a lender (how to add a mortgagee clause), and closing paperwork (proof of insurance and EOI).

What the mortgagee clause actually does

A mortgage or deed of trust usually requires the borrower to insure the property and name the lender on the policy. The mortgagee clause does three jobs.

1. It puts the lender in the payment line

The ISO Homeowners 3 – Special Form (HO 00 03) says that if a mortgagee is named in the policy, any loss payable under Coverage A (dwelling) or Coverage B (other structures) "will be paid to the mortgagee and you, as interests appear." If more than one mortgagee is named, payment follows the order of precedence of the mortgages. In practice, that is why a claim check for roof or fire damage is usually made payable to both the homeowner and the servicer.

The clause applies to the building coverages; personal property and loss-of-use payments generally go to the insured.

2. It protects the lender from the borrower's mistakes

This is the feature that makes the clause valuable to lenders. In the ISO homeowners form, if the insurer denies the insured's claim, that denial "will not apply to a valid claim of the mortgagee," as long as the mortgagee:

So if a homeowner's claim is denied for misrepresentation or a breached condition, the lender's claim can still be paid. When that happens, the insurer is subrogated to the mortgagee's rights under the mortgage (or may pay off the principal and take an assignment of the mortgage), without impairing the lender's right to recover its full claim.

3. It gives the lender advance warning

The same form states that if the insurer decides to cancel or not renew, the mortgagee will be notified at least 10 days before the cancellation or nonrenewal takes effect. That notice is what lets a servicer follow up with the borrower, pay an overdue premium, or, as a last resort, place coverage itself.

ISO forms are widely used models, but many carriers file their own wording. Always read the conditions in the policy actually issued.

Standard (union) clause vs. open (simple) loss payable clause

The industry recognizes two broad types of lender protection on property policies:

Standard / union mortgage clauseOpen / simple loss payable clause
Lender is paid for covered building lossYes, as interests appearYes, as interests appear
Lender still paid if borrower voids coverage (for example, misrepresentation)Yes, if the lender meets its own conditionsNo; the lender's rights are no better than the borrower's
Advance notice of cancellation to lenderYes, per policy termsDepends on the policy

Because a standard clause gives the lender rights independent of the borrower's conduct, investors insist on it. Fannie Mae's Selling Guide (B7-3-08) requires one- to four-unit policies to include a "standard" or "union" mortgagee clause (without contribution) in the form customarily used where the property is located, and it states plainly that a loss payable clause in place of a mortgagee clause is not acceptable. Freddie Mac's Seller/Servicer Guide (Section 4703.6) likewise calls for the insurance industry's standard mortgage clause and requires the insurer to notify the named mortgagee at least 10 days before cancellation.

For how the mortgagee role compares with loss payees and additional insureds, see loss payee vs. mortgagee vs. additional insured.

What a mortgagee clause contains

A complete mortgagee entry on a declarations page normally has these parts:

  1. Lender or servicer name, exactly as the lender instructs, including suffixes such as "N.A." or "FSB."
  2. Successor language, usually "ISAOA" (its successors and/or assigns), so the designation keeps working after the loan or its servicing is sold.
  3. Optional interest language, often "ATIMA" (as their interests may appear), if the lender asks for it.
  4. Mailing address the lender designates for insurance correspondence. This is often a dedicated insurance P.O. box, not a branch or headquarters address.
  5. Loan number, so the servicer can match the policy to the right account.

A generic format example only (not a real lender or address):

ABC Bank, N.A. ISAOA/ATIMA
P.O. Box 0000
City, ST 00000
Loan #: 0000000000

Names, abbreviation style, and addresses differ by lender and change after mergers and servicing transfers. Members can look up a specific lender's current clause on its mortgageeclauses.com lender page through search. Each listing shows a status: Verified means we confirmed it against the lender's or servicer's own primary source and recorded the date we checked; Pending Verification means we have it on file but have not yet completed that confirmation.

Who should be named: lender, servicer, or investor?

Where mortgagee clauses appear

Common mistakes

Frequently asked questions

Is a mortgagee clause the same as a loss payee clause?

No. A standard mortgagee clause protects the lender's claim even if the borrower's claim is denied because of the borrower's actions, as long as the lender meets its own conditions. A loss payee generally receives payment for scheduled personal property, vehicles, or equipment, and an open loss payable designation gives no greater rights than the insured has. Fannie Mae does not accept a loss payable clause in place of a mortgagee clause on one- to four-unit properties.

Who provides the mortgagee clause wording?

The lender or its servicer does, usually in closing instructions or an insurance requirements letter. Agency guides set what the clause must include; the exact name and address come from the lender or servicer.

Does the mortgagee clause change when my loan is sold?

The successor language (ISAOA) keeps the existing designation valid for whoever later holds or services the loan. When servicing transfers, the new or old servicer typically asks the insurer to substitute the new servicer's name and address. Fannie Mae's Servicing Guide requires servicers to request that endorsement.

Will the lender be notified if the policy is canceled?

Yes. The ISO homeowners form gives the mortgagee at least 10 days' notice before cancellation or nonrenewal, Freddie Mac requires at least 10 days' notice, and Fannie Mae requires written notice to the insured and mortgagee before cancellation. Carrier forms and state law can add requirements.

Do condo owners need a mortgagee clause?

If the lender requires an HO-6 unit-owner policy, that policy must include the standard mortgagee clause under both Fannie Mae and Freddie Mac rules. A mortgagee clause naming the lender is not required on the association's master policy under Fannie Mae's guide.

Next steps

Look up a lender's current clause with search, see what varies by state and the state pages, check the glossary, or see how agencies use mortgageeclauses.com and pricing.

Sources

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