What Is a Partial Claim on a Mortgage?

What Is a Partial Claim on a Mortgage?
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The Department of Housing and Urban Development, or HUD, offers homeowners with Federal Housing Administration loans help bring mortgage payments current. HUD grants partial claims if applicants meet certain requirements and prove they can resume paying the loan. FHA loans offer low down payment and flexible qualifying criteria.

General Requirements

To qualify for a partial claim on an FHA loan, borrowers must be between 4 and 12 months behind on their mortgage payments. The home must also be the borrower’s primary residence and remain their primary home if HUD approves the partial claim. Borrowers also provide an explanation of the financial hardship that caused them to fall behind on their mortgage payments.

Financial Requirements

Borrowers must show they don't have the means to bring their loan current and don't qualify for a loan modification. Lenders usually conduct a financial assessment to determine disposable or surplus income. If these amounts are less than the amount needed to pay the past due mortgage amount, the lender may approve the partial claim. Borrowers also must prove that their income is sufficient to cover regular mortgage payments.

Documentation Requirements

The specific documentation needed varies by lender. Typical documentation requirements for partial claims include proof of income, such as paycheck stubs, W-2 forms, two to three years of federal income tax returns, and three to six months of bank statements. The lender also needs a financial hardship letter explaining the circumstances that caused the mortgage delinquency.

Repayment Terms

Once HUD grants a partial claim, it places a lien against the home for the amount of the claim. HUD secures partial claims through zero-interest promissory notes. This means the borrower must pay off the partial claim when he sells or refinances his home and pays off the FHA loan. A borrower can make payments toward a partial claim at any time without prepayment penalties. HUD requires all borrowers to make partial claim payments by cashier’s check or money order.

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