Partial claim
A partial claim is an FHA loss mitigation option in which HUD advances funds to bring a delinquent loan current.
It is one of the better outcomes available to a borrower who fell behind and has recovered.
How it works#
The arrears — missed principal, interest, taxes and insurance — are paid by HUD on the borrower's behalf.
The first mortgage returns to current. The borrower resumes the ordinary monthly payment as though nothing had happened.
The advance becomes a subordinate lien on the property.
What makes it unusually good#
No interest.
No monthly payment. The subordinate lien is not amortised and does not add to what the household pays each month.
Deferred repayment. It comes due when the first mortgage is paid off, the property is sold, or the loan is refinanced.
So a household that missed four payments during an illness or a layoff can be made current, resume their original payment, and repay the advance years later out of sale proceeds.
Compare that with a repayment plan, which raises the monthly payment on a household that already could not manage the lower one.
When it fits#
A temporary hardship that has ended. Income recovered, arrears accumulated.
That is the specific situation it was designed for, and it is a common one.
Not for a permanent income reduction. A household whose earnings have fallen and will not recover needs a modification producing a sustainable payment, or a plan to sell while there is equity. Making them current at a payment they still cannot afford postpones the problem by months.
Practical points#
It is a lien. It appears in a title search, has to be satisfied and released at a sale or refinance, and the payoff figure comes from HUD rather than the servicer.
Eligibility and terms are set by HUD and change over time. The servicer administers the programme and applies HUD's rules rather than making its own decisions.
Documentation decides the outcome. As with every loss mitigation option, the leading cause of denial is an incomplete file rather than ineligibility.
A HUD-approved housing counsellor will know whether a partial claim is available on a specific loan and will prepare the application properly. The service is free, and in Minnesota it routes through the Minnesota Homeownership Center.
Where it sits among FHA options#
FHA runs a defined sequence, and the servicer works through it rather than choosing freely.
Informal or formal forbearance, where the hardship is ongoing.
A repayment plan, where the household can afford more than the normal payment.
A partial claim, where they can afford the normal payment but not the arrears.
A modification, where the normal payment itself is unaffordable.
Sale or a deed in lieu, where retaining the home is not achievable.
The middle three are the ones most borrowers actually need, and they are chosen by the arithmetic rather than by preference. A household that can manage the original payment and nothing more is a partial claim case; one that cannot manage the original payment is a modification case.
Being able to say which describes your own situation makes the conversation with a servicer considerably shorter.