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What Is A Mortgagee Clause?

3-Minute Read

As a homebuyer, you might already be familiar with the process of getting a mortgage. As a result of this extensive process, the mortgage lender will often take precautions to ensure that they can avoid incurring too many losses. One of these precautions can be a mortgagee clause in the insurance policy taken out on a mortgaged property.

Mortgagee Clause Definition

A mortgagee clause is a provision added to a property insurance policy that protects the lender, also known as the mortgagee, from suffering major losses on their investment. If physical damage or another kind of loss occurs to the mortgagor’s—meaning the borrower’s—property, the clause promises that the insurance provider will pay the mortgagee for that loss.

You already know that a mortgagee is a mortgage lender and a mortgagor is a borrower, but let’s talk more about their relationship with each other and the insurance provider. In a real estate transaction, a mortgagee gives a mortgage loan to the mortgagor in exchange for the title of the property purchased which is used as collateral.

Therefore, if a mortgagor stops making monthly payments or defaults on the loan, the mortgagee can foreclose on the property and sell it. However, if the property is damaged, the mortgagee could be in trouble. The mortgagee clause would be useful in this situation because it states that the mortgagee will be paid even if the mortgagor damages the property.

Mortgagees require that mortgagors purchase a homeowners insurance policy to protect the house from damage. In the case of a property damage, the insurer is required to guarantee payouts when claims covered by the homeowners insurance policy are made.

Purpose of Mortgagee Clauses

Mortgagee clauses are put in place to offer protection for the house and the lender in a real estate transaction. They can hold value for participants in a real estate transaction because they safeguard the mortgagee from losing money in the event that the property becomes damaged. In this situation, the insurance company would reimburse the mortgagee.

Nonetheless, the mortgagee is still the loss payee, meaning they are the party to whom the claim from the loss is to be paid. There are many types of losses that can occur with a piece of property. Damages are covered by the mortgagee clause, as are other acts such as arson.

As previously mentioned, mortgagees will require that mortgagors purchase an insurance policy to protect the house from damage. Homeowners insurance and renters insurance are two types of property insurance. Homeowners insurance is required for owners who have purchased property, while renters insurance is required for those renting someone’s property. Both types of insurance protect the property from damage.

What’s In A Mortgagee Clause?

Now, let’s take a look at some of the components of a typical mortgagee clause.

Lender Protections

As previously mentioned, there are many benefits and protective protective provisions that come with mortgagee clauses. They primarily protect the mortgage lender or mortgagee in the event that the property becomes damaged. So instead of paying out of pocket, lenders are covered by the insurance company and don’t lose out on a lot of money.


ISAOA is a part of the mortgage clause that stands for “its successors and/or assigns.” It gives the mortgagee the ability to transfer their rights to another bank or institution, allowing mortgagees to sell the mortgagor’s loan on the secondary mortgage market. It is common for mortgagees to sell mortgagor’s loans in order to save up for future loans.


Another acronym that is common to see in mortgage clauses is ATIMA. This stands for “as their interests may appear” and is used to extend an insurance policy to cover other parties that the mortgagee does business with.

How Do You Get A Mortgagee Clause?

If you’re interested in getting a mortgagee clause, make sure to reach out to a lender so that a mortgagee contract can be added to your current contract. Quicken Loans specifically utilizes mortgagee contracts.

The Bottom Line

Now that you’ve gotten to learn more about mortgagee clauses and their protections, you can decide if getting one added to your contract is right for you. Mortgagee clauses can be very beneficial for homeowners and provide protection for both the house and the mortgage lender. Learn more about mortgages and read more articles in the Quicken Loans Learning Center.

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