Mortgagee Clause (Why Your Check Names the Bank)
Also called: mortgagee clause, loss payee, standard mortgage clause, insurance check made out to mortgage company, loss draft
Homeland Public Adjusters · Last reviewed: October 2026
The mortgagee clause (standard mortgage clause) is the policy provision that names your lender as a mortgagee and gives it an independent right to the insurance proceeds up to the loan balance. Because of it, the carrier issues claim checks payable jointly to you and the mortgage company, and the servicer controls how the money is released for repairs through its loss-draft process. The clause also protects the lender from your acts: the bank still gets paid even if your claim is denied for something you did.
Full guide: Insurance Check Made Out to Your Mortgage Company
What the clause does
- Names the lender as mortgagee (not a loss payee; a loss payee is the term for personal property such as a financed appliance or equipment).
- Requires the carrier to pay the lender “as interests may appear,” which is why checks are joint.
- Gives the lender the right to notice of cancellation and, on a denial based on the insured’s acts, a separate right to recover.
- Lets the lender apply proceeds to the loan if the property is not repaired, under the mortgage’s own terms.
The loss-draft process
Each servicer has a claims department and a threshold (often $10,000 to $40,000) below which it simply endorses the check. Above the threshold it deposits the funds in a restricted account and releases them in draws: a first draw to start, then inspections at 50% and completion, with a contractor’s W-9, signed contract, lien waivers and sometimes a conditional release at each stage. Delays here are the most common reason a paid claim does not become a repaired house. The public adjuster’s estimate, the carrier’s estimate and the contractor’s contract need to agree before the first draw.
Florida
Florida’s payment rules in §627.7011 (ACV first, holdback as work is done) run in parallel with the servicer’s draw schedule, and the two often conflict: the carrier releases the holdback when repairs are complete, and the servicer holds the final draw for the same reason. Our article on insurance checks made out to the mortgage company covers the paperwork step by step. If the home is a total loss, the lender may apply proceeds to the balance; Florida’s valued policy law (§627.702) sets the amount at the policy limit.
New Jersey
The same ISO clause applies; New Jersey’s regulation N.J.A.C. 11:2-17.7 governs the carrier’s timing but not the servicer’s. Federal servicing rules (RESPA/Regulation X) and the GSE servicing guides set the general framework for how servicers must handle insurance proceeds; a servicer that sits on funds past its own stated timelines can be escalated through its complaint process and the Consumer Financial Protection Bureau.
Frequently asked questions
Can the mortgage company keep my insurance money?
Why is the check made out to both of us?
Does the public adjuster’s fee come out before the bank’s share?
Related terms
Recoverable depreciation is the money your insurer withholds from a replacement-cost claim payment until you repair or replace the damaged property.
A proof of loss is a sworn, signed statement from the policyholder setting out the date and cause of the loss, the property involved, the interest of the insured and others, other insurance, and the…
Replacement cost value (RCV) is what it costs to repair or replace damaged property with new materials of like kind and quality today.
Coinsurance, on a property policy, is a condition that requires the building to be insured for at least a stated percentage of its value (commonly 80%, sometimes 90% or 100%).
If this is your loss, call Homeland before you talk to the insurance company: Florida (305) 783-3777, New Jersey (732) 517-3777, 24 hours. A licensed public adjuster reviews the claim for free and calls you back right away. No Recovery, No Fee.
Sources
This article is for general information only and is not legal or insurance advice. Statutes, regulations and policy wording change, and how they apply depends on your own policy and the facts of your claim. Homeland Public Adjusters is a public adjusting firm, not a law firm.
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