Selling Guide

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B7-3-08, Mortgagee Clause for Property and Flood Insurance (12/04/2018)

Introduction

This topic contains information on the mortgagee clause for property and flood insurance.


Mortgagee Clause

Fannie Mae does not have to be named in the mortgagee clause, unless the coverage would be impaired by Fannie Mae not being named. If Fannie Mae is named, the clause should read: “Fannie Mae, in care of (insert servicer’s name and address here).” This ensures that all matters related to the 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 assigns,” should be shown as the mortgagee. If the lender is not the servicer, the servicer’s name should be specified. In all cases, the insurer should 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 loss payee on any property insurance policy.

The table below provides additional requirements for mortgagee clauses.

Type of Mortgage Mortgagee Clause Requirements
First mortgage on an individual single-family property The 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 mortgagee clause that amounts to a mere loss payable clause is not acceptable.
Second mortgage The mortgagee clause in the property insurance policy for the first mortgage must be amended to recognize the existence of the second mortgage and to clearly set out Fannie Mae’s interest in the policy coverage.

The lender should inform the insurer about which mortgage servicer is responsible for payment of the insurance premium.

First mortgage secured by a unit in a condo project or a co-op share loan If a unit owner or shareholder maintains an individual policy (as indicated by the project’s legal documents) or if an HO-6 policy is maintained for interior coverage, it must include the standard mortgagee clause as defined above.

A mortgagee clause naming Fannie Mae or the lender is not required for a master project property insurance policy, an NFIP Residential Condominium Building Association Policy or equivalent flood policies issued by a private insurer.

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