Who Gets Named as Mortgagee on Your Insurance Policy
The mortgagee clause protects your lender's financial interest in your property. Most borrowers assume Fannie Mae gets named here, but that's usually wrong. Fannie Mae only gets named as mortgagee when their coverage would be impaired without it — which is rare.
In most cases, your loan servicer gets named as mortgagee. The clause must read exactly as: "Fannie Mae, in care of [servicer's name and address]" when Fannie Mae is named, or "[servicer's name], its successors and/or assigns" when the servicer is named directly.
Say you get a loan from ABC Mortgage, but XYZ Servicing handles your payments. Your insurance policy would name "XYZ Servicing, its successors and/or assigns" as the mortgagee. All correspondence, bills, and policy documents go to XYZ Servicing, not to you or Fannie Mae.
If your mortgage is registered with MERS (Mortgage Electronic Registration Systems), MERS cannot be named as mortgagee on your insurance policy. This is true even though MERS might be listed as the original mortgagee on your mortgage documents. The servicer still gets named on the insurance.
What Type of Mortgagee Clause You Need
For single-family homes and properties with 2-4 units, your policy must include a "standard" or "union" mortgagee clause. This clause protects the lender's interest even if you do something that would normally void the policy.
The key phrase is "without contribution." This means the insurance company cannot reduce the lender's payout based on your actions. If you leave the gas on and burn down the house, the insurer still pays the lender the full amount owed, even though your negligence caused the loss.
A "loss payable" clause won't work. Insurance companies sometimes try to substitute this weaker language, but Fannie Mae won't accept it. The loss payable clause doesn't give the lender the same protections as a true mortgagee clause.
Named Insured Requirements
Every person who holds title to your property must be listed as a named insured on the policy. This isn't just about meeting Fannie Mae's requirements — it protects your ability to file claims and receive benefits.
If you're married and both spouses are on the deed, both names must appear as named insured. If you bought the house with a business partner and you're both on title, both of you need to be named insured. Missing a property owner from the named insured line can create problems when you need to file a claim.
For condos and planned unit developments (PUDs), the homeowners association typically gets named as insured on the master policy that covers common areas and the building structure. For co-ops, the cooperative corporation gets named as insured on the master policy.
Notice of Cancellation Requirements
Your insurance company must provide written notice before canceling your policy. This notice goes to both you (the named insured) and the mortgagee. The advance notice gives your lender time to force-place insurance if you don't replace the canceled policy.
Most states require 30 days' notice for non-payment cancellations and 60 days for other reasons. Your lender needs this time because they're required to maintain continuous coverage on the property. Without proper notice, there could be a gap in coverage that violates your mortgage terms.
The notice requirement only applies to individual policies you purchase directly. It doesn't apply to master policies that cover condo or PUD developments, since you're not the policyholder on those master policies.
Documentation Your Lender Needs
Your lender will request a copy of your insurance policy or a certificate of insurance before closing. This document must show the correct mortgagee clause, named insured, and notice of cancellation provisions.
The insurance company typically provides a declarations page that summarizes the key policy terms. This page should clearly show who's named as insured, who's named as mortgagee, and the policy's effective dates and coverage amounts.
If you're buying a condo or townhome, your lender may also need documentation about the master insurance policy. The homeowners association or management company can provide a certificate showing the master policy details and confirming that your unit is covered.
Why These Rules Exist
Fannie Mae's insurance requirements protect both borrowers and lenders from coverage gaps that could lead to financial losses. The mortgagee clause ensures the lender can collect insurance proceeds to pay down your loan balance if the property is damaged or destroyed.
The named insured requirements prevent situations where insurance companies deny claims because the wrong person filed them. If you're not listed as named insured but you're on the deed, the insurer might refuse to pay your claim.
Notice of cancellation requirements give lenders time to protect their investment. If your policy gets canceled without notice, there's a period where the property has no coverage. The lender could face a total loss if something happens during that gap.
Common Problems and Complications
Insurance agents sometimes list the wrong entity as mortgagee, especially on MERS loans. They see MERS on the mortgage documents and assume MERS should be the mortgagee on insurance. This creates problems because MERS cannot legally be named as mortgagee on insurance policies.
Divorce situations can complicate the named insured requirements. If one spouse gets removed from the deed but stays on the mortgage, the insurance needs to reflect the current ownership. The person who remains on the deed must be named insured, even if both spouses are still liable for the mortgage.
Some insurance companies use non-standard mortgagee clause language that doesn't meet Fannie Mae's requirements. They might include contribution clauses or other limitations that reduce the lender's protection. Your lender will reject these policies and require you to get proper coverage.
Condo buyers sometimes discover their building's master policy doesn't meet Fannie Mae's requirements. This can delay closing while the homeowners association works with their insurance company to fix the coverage. You can't control the master policy, but you need to verify it meets requirements before closing.
References
For the official guidelines, see B7-3-08: Mortgagee Clause, Named Insured, and Notice of Cancellation Requirements in the Fannie Mae Selling Guide.
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Original Fannie Mae Guideline Text
B7-3-08, Mortgagee Clause, Named Insured, and Notice of Cancellation Requirements (12/14/2022)
Mortgagee Clause for Property and Flood Insurance
Named Insured for Property and Flood Insurance
Notice of Cancellation for Property Insurance
Mortgagee 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.
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
If an individual flood insurance policy is required in accordance with Requirements for Project Developments in
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.
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.
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
