FHA updates Partial Claim Document Recording and Payoff Statement Process
Since the beginning of Covid 19, Congress has provided HUD with the authority to use Partial Claims, which are zero interest subordinate liens, on their own or in combination with loan modifications, as a loss mitigation tool. Mortgagees may use to assist Borrowers in bringing their Mortgage current after a default episode. Since the start of the COVID-19 pandemic, over one million Borrowers FHA-insured Mortgages have received a Partial Claim to help bring their Mortgage current and avoid foreclosure.
The Problem:
Getting HUD partial claims recorded has been an ongoing problem, leading to lots of issues for borrowers who sell their home and then are pursued by HUD later for partial claims that were never recorded properly.
Even more troubling is that almost no one expects their partial claim amount to be as large as it is and more often than not partial claims wipe out all the sellers equity, leaving them to pursue a short sale.
The Solution:
To attempt to rectify these issues, HUD is updating two procedural requirements where this tool is used to assist Borrowers. First, the time allowed to record Partial Claim documents is being extended in response to industry feedback concerning challenges in meeting the current timeline. Second, to provide clarity concerning the total outstanding debt associated with Partial Claims and improve the accuracy and response time for payoff requests, HUD is implementing a streamlined process for providing payoff statements for the Mortgage and any Partial Claims. This will also reduce confusion and help Borrowers understand the total debt associated with their FHA insured Mortgage.
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Last Updated on October 22, 2024 by Minna Reid