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5 min read Apr 10, 2024

Mortgagee Clause: Definition, Purpose, and Example

A mortgagee clause is like a special rule in your homeowner’s insurance policy. It’s there to protect the lender (the bank or the mortgage company) who gave you the money to buy your home.

Understand the mortgagee clause, as it is important because it affects your rights and responsibilities as a homeowner. You do not want to jeopardize your investment because you are not fluent in legal terms!

We have simplified the mortgagee clause in terms of mortgage insurance for your better understanding.

Mortgagee Clause

  • What is the Mortgagee Clause: The mortgagee clause is a part of your property insurance that adds the lender as an extra insured party. It gives the lender protection in case of property damage.
  • How Borrowers Benefit: The clause ensures that borrowers maintain proper insurance. Moreover, the clause helps protect the property, which reduces the risk of financial loss for both parties.
  • How It Affects Insurance Claims: Incase of property damage, the insurance company will first pay-out the lender.
  • What is Lender-Placed Insurance: If a borrower doesn’t maintain proper insurance, the lender may choose to get insurance themselves. However, it’s usually more expensive and offers limited coverage.

Who is the Mortgagee?

In very simple terms, the mortgagee is the person or organization that lends you the money to buy a home. They could be a bank, a mortgage company, or another financial institution.

The mortgagee is the one who provides the loan and has the legal right to take your home if you don’t make your mortgage payments as agreed.

Mortgagee Vs. Mortgagor

The mortgagor is you (home buyer), the person or entity who borrows money from the mortgagee to buy a home.

MoneyThey are the borrowersThey are the lenders
ServicesThey apply for a loanThey approve the loan
PaymentsThey make timely loan paymentsThey collect the monthly payments from the mortgagor
ApplicationThey can be an individual or entityThey can be an individual or entity
Loan AmountThey receive the loan They give the loan

What is a Mortgagee Clause?

The mortgagee clause is a provision in the property insurance policy. It is there to protect the lender’s investment. In case of property damage, the lender will receive a payout from the borrower’s insurance company.

Moreover, the lender is protected even if the damage was intentional. If a homeowner commits arson and fails to receive insurance, the mortgagee clause still protects the lender.

How Does a Mortgagee Clause Work?

Here is a step-wise breakdown of a mortgagee clause works –

  • Insurance Policy: The homeowner will buy an insurance policy to protect their property.
  • Mortgagee Clause Inclusion: The mortgagee clause is added to the insurance policy. It specifies the lender as an additional party interested in the insurance coverage.
  • Insurance Claim by Lender: In case of property damage, the lender can claim insurance to cover any loss suffered.
  • Payment Distribution: The insurance company will first pay the lender. This helps the mortgagee recover any outstanding loan balance.

Mortgagee Clause Example

The mortgage clause becomes a separate contract between the insurance company and your lender.

Say, your property suffers damage because of fire or any natural disaster. The insurance company will pay your lender first. You get any additional money that exceeds the lender’s loan balance.

What are the components of the Mortgagee Clause?

Here are a few terms you might come across in the mortgage clause –


ISAOA means “Its Successors And/Or Assigns” and is an important aspect of the mortgagee clause. This allows the lender to sell the mortgage on the secondary market. The lender also has the option to assign the service rights of your loan to a 3rd party servicer.


ATIMA stands for “As Their Interests May Appear” and is similar to ISAOA. The ATIMA clause allows the lender to extend the insurance coverage to others.

How Do You Get a Mortgagee Clause?

Many lenders may require that you add the mortgagee clause to your insurance policy before the approval for a home loan. You must provide the name and address of the mortgagee to your insurance provider. Additionally, you will also have to specify the loan number.

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The Bottom Line

The mortgage clause is there to protect the lender. As the home buyer, you need a mortgage to fulfill the purchase. Most lenders will not approve your home loan unless you include a mortgagee clause in your insurance!

Talk with your lender to understand their specific conditions related to the mortgage. Additionally, speak with the insurance company before you settle with one lender. Different lenders may have different requirements.

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More mortgage-related blogs for you!

» Mortgage Protection Insurance ExplainedDo You Need It?

» What is Mortgage Amortization: How your mortgage payments work?

» Mortgage PreapprovalWhat it is and How to Get it?

» Mortgagor: Read to know more.

Frequently Asked Questions

How to remove a mortgagee clause?

A mortgagee clause can only be removed by the lender or mortgage servicing company that is named in the mortgage agreement.

Where can i find my mortgagee clause?

Typically, you can find the mortgagee clause on your mortgage statement or other mortgage-related documents provided by your lender.

What is a standard mortgage clause?

Standard mortgage clause is another name for mortgagee clause. It protects the mortgage lender in case of property damage. Even if the damage was intentionally caused by the homeowner.

Who is the mortgagee in a mortgage contract?

The mortgagee in a mortgage contract is the lender who provides the loan for the property purchase.

What is the loss payee clause?

The loss payee clause designates a specific party, such as a lender or leasing company, as the recipient of insurance claim payments in the event of a covered loss. This clause ensures that the designated party actively receives the funds to protect their financial interest.


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