Buying a home is an exciting milestone in life. But it also comes with a lot of paperwork and requirements, including getting the right insurance policies in place. One important insurance requirement for any mortgage is having a proper mortgagee clause. This identifies the lender’s interest in the property and ensures they get paid if there is a covered loss on the home.
In this article, we’ll explain what a mortgagee clause is, why it’s required, and how it works specifically with Pennymac Loan Services LLC. As one of the nation’s leading mortgage servicers, it’s helpful for Pennymac customers to understand their mortgagee clause requirements when setting up insurance on a new home loan.
What is a Mortgagee Clause?
A mortgagee clause is a simple provision that is included in a homeowner’s insurance policy. It identifies the mortgage lender as a payee on any insurance claim payouts for damage to the property.
The clause lists the name and address of the mortgage lender which in this case would be
Pennymac Loan Services, LLCIts Successors and/or AssignsPO Box 6618Springfield, OH 45501-6618
The lender is named this way on insurance policies because mortgages are often sold and transferred between banks and mortgage servicers like Pennymac. By naming “its successors and/or assigns” it ensures coverage will follow the loan if it is sold to another company.
Home insurance policies only pay the homeowner directly by default. So the mortgagee clause is critical for making the lender a payee as well up to the amount still owed on the mortgage loan. This protects the lender’s financial interest in the property that secures the debt.
Why a Mortgagee Clause is Required
Lenders require a mortgagee clause included on home insurance for a couple reasons:
1. Protecting their collateral – The home itself is the collateral backing the loan. If the home was destroyed in a fire or other covered disaster, the insurance claim money helps make the lender whole on the remaining loan balance. Without a mortgagee clause, the lender may not get paid from the claim.
2. Avoiding delinquencies – After a loss, the insurance funds help the homeowner rebuild or repair the home. This protects the home’s value as collateral. If the owner couldn’t afford repairs without the claim money, it could lead to foreclosure and a loss for the lender.
3. Limiting liabilities – If the owner is uninsured or under-insured, the mortgage lender could be responsible for upkeep and damages on the property after taking ownership through foreclosure. Proper insurance minimizes this risk.
The bottom line is that a mortgagee clause protects the interests of both the homeowner and the mortgage lender. It’s a simple addition that makes the insurance policy payable to the lending bank if they have a remaining secured interest in the home.
How Pennymac’s Mortgagee Clause Works
Pennymac Loan Services has some specific requirements for the mortgagee clause based on their policies and mortgage servicing needs. Here are the key details Pennymac customers should know:
Naming convention – The mortgagee clause should follow Pennymac’s exact wording of their full legal name and address, as noted earlier.
Loan number – Your specific Pennymac loan number should also be included along with their name and address. This connects the policy to your mortgage.
Property insurance – A mortgagee clause is required on any hazard, fire, flood and other property insurance policies. That includes condo and HOA master policies.
Coverage amount – The insurance coverage limits must equal the replacement cost value of the home or maximum allowed under FEMA guidelines for flood policies.
Policy renewals – Existing insurance policies need to be updated with Pennymac’s mortgagee clause within 30 days of a new loan closing or transfer. The clause should carry forward automatically on renewals.
Notifications – Policyholders must notify Pennymac if there are any changes to insurance policies or lapses in coverage. Pennymac monitors this but reporting any updates helps avoid issues.
Following these specific requirements ensures Pennymac customers are properly covering the mortgage lender’s interests under the mortgagee clause. This protects the collateral securing the debt and avoids problems that could occur from uninsured losses.
Adding and Updating the Mortgagee Clause
The good news is adding a mortgagee clause is simple and just involves contacting your insurance agent. When purchasing a new policy or renewing coverage, tell your insurance provider you need Pennymac added to the policy with their full name, address and your loan number.
You’ll then need to send updated proof of insurance to Pennymac. This can be done online on their website or by fax, mail or their mobile app. Be sure to include your declaration page listing Pennymac as the mortgage holder.
If your insurance renews automatically, check your renewal paperwork for the mortgagee clause. Follow up with your insurance company immediately if Pennymac isn’t listed or the details are incorrect. It’s important your renewal continues the lender’s coverage without any gaps.
When selling your home or paying off the mortgage, let your insurance company know the mortgagee clause for Pennymac can be removed at that time. Also notify Pennymac so they stop tracking that policy going forward.
Getting Insurance Claim Checks to Pennymac
In the unfortunate event your home has serious damage from a covered loss, here’s how getting claim check proceeds to Pennymac works:
The insurance company will issue payouts in both your name and Pennymac’s for their secured interest.
You’ll need to “endorse” the check to sign it over to Pennymac for their mortgage payoff amount before cashing your portion.
Contact Pennymac ahead of time so they can provide the payoff balance amount and guidance on sending the check.
For smaller losses you repair yourself, Pennymac may allow you to cash the whole check if you provide repair receipts.
Send payments promptly to avoid late fees or credit damage from non-payment. Work with Pennymac if you need a temporary suspension of payments.
Remaining insurance money is yours to arrange repairs after Pennymac’s mortgage balance is paid.
Settling insurance claims with a lender can seem complicated. But Pennymac has experience navigating this process smoothly for homeowners. Be sure to reach out to them for specifics on getting claim checks signed over and cashed properly.
Common Mortgagee Clause Questions
If you’re a new Pennymac customer, you probably still have some questions about mortgagee clauses and insurance requirements. Here are answers to some frequently asked questions:
Do I need to send my full insurance policy to Pennymac?
No, just the declarations page showing their mortgagee clause is required annually. This lists coverages, limits and the lender wording.
What if my insurer doesn’t include mortgagee clauses?
The lender’s interest must be noted in order for them to approve the policy. Only use insurers that allow mortgagee clause endorsem*nts.
Can I get insurance without an escrow account?
Yes, but you’ll need to demonstrate you’ve paid premiums in full yourself and provide proof of Pennymac’s mortgagee clause.
What happens if my policy lapses?
This is considered a default on your loan terms. Pennymac may “force place” temporary coverage at a higher cost to you until your policy is reinstated without gaps.
Do I need a mortgagee clause on home equity loans?
Yes, if Pennymac holds a secured lien on the property with a home equity loan or HELOC. The clause protects their interest in the collateral.
What about insurance premium refunds from cancellations?
Any refunds should be payable to you only since they represent prepaid coverage. Immediately cash these without involving Pennymac.
Key Takeaways on Pennymac’s Mortgagee Clause
A mortgagee clause names the lender as a payee on insurance claim payouts for damage to the property that secures a home loan.
Having a mortgagee clause benefits both the homeowner and mortgage lender when insured losses occur.
Pennymac has specific requirements for their name, address and your loan number that must be followed on any property insurance policies.
Customers need to notify Pennymac when updating insurance coverage and provide annual proof their mortgagee clause is in place correctly.
After a loss, work closely with Pennymac to get insurance claim proceeds endorsed and sent promptly to avoid problems.
While the mortgagee clause may seem like a hassle, it provides important protection for your home collateral and mortgage balance. Following Pennymac’s requirements ensures seamless processing if the need for an insurance claim arises down the road.
