If you have an FHA backed loan and you’ve ever had any type of loan workout – including a loan modification or forbearance, odds are you have a partial claim against the home.
What is a partial claim?
A partial claim is an interest-free loan from HUD to get caught up on overdue payments on an FHA loan, and is usually completed along with a loan modification. The partial claim does not need to be paid off until the property is sold or the first mortgage is paid off.
What happens if I sell my home and I can’t sell for enough to satisfy the mortgage and the partial claim?
If the proceeds of the home sale are insufficient to pay off both loans, you will need to pay the remainder out of pocket or pursue a short sale. FHA has their own short sale process (FHA PFS Program), and if you qualify you can sell the property for less than you owe and have the remainder of the debt forgiven.
The problem with partial claims is that they end up being far larger than expected by the homeowner, and usually this addition to the debt owed against the home almost certainly lands the homeowner in a position where they are underwater.
*Effective October 8, 2021, ISN is servicing all HUD partial claims:
We went through a short sale and Minna's team was amazing every step of the way. They made a very sad and stressful time seem easier by handling all the little details. They always stayed positive and put us in contact with an amazing legal team. We couldn't be more pleased.
Last Updated on April 5, 2022 by Minna Reid