You may be eligible for a partial claim on your Federal Housing Administration mortgage loan to help bring a loan that is delinquent or in default to "current" status. A "partial claim" is a term for a payment that will cover what you currently owe on the loan. The loan will no longer be considered delinquent, and you will be responsible for repaying the claim in the future. The exact benefits of the claim will depend on your unique situation, but all partial claims will help you avoid foreclosure on your property.
Partial Claim Program
This program is designed for individuals who suffered financial hardships that caused them to temporarily fall behind on mortgage payments. These individuals have overcome their hardships and can begin making loan payments again, but they cannot afford to pay the missed payments on the loan. The FHA will help a borrower by agreeing to continue the loan through the use of a "note" similar to an IOU. The borrower avoids foreclosure, and the note is repaid once the borrower has the money to make the payment.
Partial Claim Benefits
You will receive an interest-free note from your lender in the amount needed to bring the loan current. This note is made payable to the Department of Housing and Urban Development in the name of the borrower. There are no periodic payments on this note, and the note is not added to the primary mortgage. Instead, full payment on the note is due on or before the date the mortgage is paid off or the property is sold, whichever occurs first. There is no prepayment penalty for repaying the note prior to this time. You can also pay the note in partial payments while the loan is still active. While the note is active, the mortgage insurance premium on the FHA-secured loan may increase. Once the note is paid off, however, a refund for this premium may be granted.
Partial Claim Requirements
If the partial claim process sounds too good to be true, it is not. Many qualified borrowers take advantage of this program each year. The key is, though, to qualify based on your credit, payment history and loan type. Only if the HUD and lender feel you have a high chance of paying off the note will you be granted the benefits listed above. Requirements include the following:
- The loan is secured for a primary residence.
- The loan is between 4 and 12 months delinquent.
- You can provide proof that you can begin making payments in full once the claim has been paid.
- You can provide proof that the circumstances that caused you to fall behind on the mortgage have changed.
- You can provide proof of your long-term financial stability.
- Even though you are now financially capable of paying the loan, you do not have the means to pay the past due amount through any modification program.
- If you are in foreclosure or have filed for bankruptcy, you may qualify, but both will require specific approval by the lender or court.