A provision in a property insurance policy that names the lender holding the mortgage and gives it the right to be paid from the insurance proceeds when the collateral is damaged, up to its interest in the property.
The longer version
A mortgagee clause is the part of a borrower's property insurance policy that protects the lender. It names the mortgagee, usually the lender followed by "its successors and/or assigns" (ISAOA) or "as their interests may appear" (ATIMA), and directs the insurer to pay the lender's share of a covered loss. On a commercial loan, the lender appears in the mortgagee box on the evidence of property insurance, typically the ACORD 28, before the loan funds.
There are two forms. An open or simple mortgage clause only says who gets paid. The lender's right to recover depends on the borrower's own coverage, so if the borrower's fraud or breach voids the policy, the lender's claim can fail with it. A standard mortgage clause, also called a union or New York clause, adds language that the lender's interest is not invalidated by the borrower's acts or neglect, which courts treat as a separate agreement between the insurer and the lender. In exchange, the lender usually takes on duties such as paying the premium if the borrower does not and reporting a known change in risk.
The clause covers real property: the building the mortgage secures. Personal property, equipment and business income are handled through a loss payable provision, which is a different designation. A lender reviewing insurance at closing checks both: that the lender is named correctly in each place, with the correct entity name and address, and that the clause type matches what the loan documents call for. Those requirements live in the loan agreement, and counsel and the insurance consultant confirm whether the policy meets them.
Small errors here are common and expensive later. A certificate that names the wrong lender entity, omits ISAOA after a loan sale, or lists the lender only as an additional insured on a liability policy does not put the lender in the property policy's mortgagee position, and the gap usually surfaces only after a loss.
In Prodeal
The insurance review runs as checklist lines with an owner, a status and a due date. The borrower's broker uploads the evidence of property insurance and the lender's reviewer marks the mortgagee designation cleared or sends it back, and the history of each version stays on the item.
Common questions
- What is a mortgagee clause?
- A provision in a property insurance policy that names the lender holding the mortgage and directs the insurer to pay the lender's share of a covered loss to the collateral, up to its interest in the property.
- What is the difference between a standard and an open mortgage clause?
- An open or simple clause only names who is paid, so the lender's recovery depends on the borrower's coverage staying valid. A standard or union clause adds that the lender's interest is not invalidated by the borrower's acts or neglect, which courts treat as a separate agreement between insurer and lender.
- What does ISAOA ATIMA mean in a mortgagee clause?
- ISAOA stands for "its successors and/or assigns" and ATIMA for "as their interests may appear". Together they keep the clause pointing at whoever holds the loan after a sale or assignment, limited to that holder's interest.
- What does a mortgagee clause example look like?
- It is a short block on the policy or evidence of insurance with the lender's legal name, the ISAOA or ATIMA wording and a mailing address for notices. The exact name and wording a given loan needs come from the loan documents, not from a generic example.
- Is a mortgagee the same as a loss payee?
- No. A mortgagee clause protects a lender's interest in real property on a property policy. A loss payee designation covers a creditor's interest in personal property, such as equipment or inventory.
- Loss payee, definedThe designation for personal property and equipment.
- Evidence of insuranceWhere the mortgagee clause shows up at closing.
- What lenders check on a borrower's insuranceThe insurance review that does not fail late.
- The commercial loan closing checklistWhat goes on the list and who owns each line.
- Loan closing softwareWhere the insurance review is tracked.