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B7-3-08, Mortgagee Clause, Named Insured, and Notice of Cancellation Requirements (12/14/2022)

Introduction

This topic contains information on the mortgagee clause, named insured, and notice of cancellation requirements.


Mortgage Clause for Property and Flood Insurance

The following requirements apply to individual property and flood insurance policies maintained by the borrower and do not apply to master property and flood insurance policies for project developments.

Fannie Mae must not be named in the mortgagee clause unless the coverage or its interest would be impaired by Fannie Mae not being named. If Fannie Mae is named, the clause must read: "Fannie Mae, in care of (insert servicer's name and address here)." This ensures that all matters related to the applicable insurance policy are referred directly to the servicer and not to Fannie Mae.

When Fannie Mae is not named in the mortgagee clause, the lender's name, followed by the phrase "its successors and/or assigns," and mailing address must be shown as the mortgagee. If the lender is not the servicer, the servicer's name, followed by "its successors and/or assigns," and mailing address must be specified. In all cases, the insurer must be instructed to send all correspondence, policies, and bills to the servicer (or to both the first and second mortgage servicers).

If the mortgage is registered with MERS and is originated naming MERS as the original mortgagee of record, MERS must not be named as mortgagee or loss payee on any property insurance policy. The mortgagee clause must name the servicer (unless Fannie Mae must be named because the coverage or its interest would be impaired as mentioned above).

The following table provides additional requirements for mortgagee clauses.

Property Type Mortgagee Clause Requirements
One- to four-unit property The applicable insurance policy must include (or have attached) a "standard" or "union" mortgagee clause (without contribution) in the form customarily used in the area in which the property is located. A loss payable clause in lieu of a mortgagee clause is not acceptable.
Unit in a project development

If a unit owner or shareholder maintains an individual property insurance policy (as indicated by the project's legal documents) or if an individual property insurance policy is required in accordance with Determining if a Master Property Insurance Policy is Required in  B7-3-03, Master Property Insurance Requirements for Project Developments for interior coverage, it must include the standard mortgagee clause as defined above.

If an individual flood insurance policy is required in accordance with Requirements for Project Developments in  B7-3-06, Flood Insurance Requirements for All Property Types, it must include the standard mortgagee clause as defined above.

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 issued by a private insurer.

 


Named Insured for Property and Flood Insurance

The following table provides the requirements for the named insured on property and flood insurance policies.

Property Type Requirement for Named Insured
One- to four unit properties The individual property or flood insurance policy must name all persons holding title to the subject property as named insured to ensure the borrower(s) has full rights to the policy and Fannie Mae's interest or ability to receive benefits is not impaired.
Individual units in a project development
Condo projects The master property or flood insurance policy must designate the HOA as the named insured. If the condo's legal documents permit it, the master property or flood insurance policy can specify an authorized representative of the HOA, including its insurance trustee, as the named insured.
PUD projects The master property or flood insurance policy must designate the HOA as the named insured.
Co-op projects The master property or flood insurance policy must designate the co-op corporation as the named insured.

 


Notice of Cancellation for Property Insurance

The following requirements apply to individual property insurance policies maintained by the borrower and do not apply to master property insurance policies for project developments.

The following table provides the requirements for notice of cancellation on property insurance policies.

Project Type Requirement for Notice of Cancellation
One- to four-unit properties The property insurance policy must provide for written notice to the named insured and mortgagee(s) before the insurer can cancel the policy.
Individual units in a project development

 


Recent Related Announcements

The table below provides references to the Announcements that have been issued that are related to this topic.

Announcements Issue Date
Announcement SEL-2022-10 December 14, 2022
Announcement SEL-2021-11 December 15, 2021
Announcement SEL-2018-09 December 04, 2018

 

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