How Partial Claim Loans Can Help With Overdue Mortgage Payments

If you’re a homeowner and you’re having trouble making your mortgage payments, the U.S. Department of Housing and Urban Development (HUD) may have programs to help. HUD’s programs are designed to help people who have government-backed FHA loans avoid foreclosure. 

In this article, we’ll talk about HUD’s programs for homeowners who are behind on their mortgage payments because of a job loss or other financial hardship. If you qualify for one of these programs, you may be able to save your home and prevent foreclosure.

What Happens When You Get Behind on Your Mortgage Payments?

If you fall behind on your mortgage payments, your mortgage company will give you a deadline to make up your missed payments so you can avoid foreclosure. If you don’t make up the missed payments or come to another agreement with your lender, the mortgage company can foreclose on your home. 

What Is Foreclosure?

In a foreclosure, the bank or mortgage company takes your home back and sells it to recoup its costs. Your mortgage lender or loan servicer has the legal right to do this because a mortgage creates a lien on the property, which allows the lender to repossess it if you don’t keep up with the loan.

What Programs Can Help You Avoid Foreclosure?

HUD and the Federal Housing Administration (FHA) offer programs, called loss mitigation options, to help FHA-insured homeowners catch up on missed payments and avoid foreclosure. 

These options are designed to make your mortgage payments more manageable and give you the chance to stay in your home.

Some common loss mitigation options include:

• Loan modifications

• Forbearance agreements

• Repayment plans

• Partial claims. 

Each of these programs has specific requirements and benefits. A HUD-approved housing counselor can help you understand which program might work best for you, and you can also contact your lender directly to explore your options. 

How Forbearance Can Help You Stay in Your Home

If you’re struggling to keep up with your mortgage payments but want to stay in your home, a mortgage forbearance agreement might be a good option to explore. 

With this agreement, you and your lender can agree to temporarily reduce or pause your mortgage payments, giving you time to get back on your feet financially.

Once the forbearance period ends, you’ll resume making your regular mortgage payments. In some cases, your lender may also offer options to repay the missed payments gradually.

Catch Up on With a Repayment Plan

A repayment plan can help you get back on track if you’re experiencing a short-term financial hardship. With this option, you and your lender agree on a schedule to repay your missed payments over time, often by adding a portion of the overdue amount to your regular monthly payments.

Repayment plans are usually a good fit for borrowers who are behind on a few months of payments, don’t qualify for other assistance programs, or don’t want to refinance their mortgage loan. This option lets you bring your mortgage current without making a large lump-sum payment, helping you get back in good standing relatively quickly.

Loan Modification May Lower Your Mortgage Payments

With a loan modification, your lender adjusts the terms of your mortgage—such as lowering your interest rate or extending the loan term—to make your monthly payments more manageable.

You can request a loan modification directly from your lender, and in many cases, they’ll evaluate your financial situation to determine if you qualify. 

Be cautious, though — scams targeting homeowners in financial distress are common, so make sure you’re working with a reputable company or dealing directly with your lender.

The loan modification process can take time, but many people find it’s worth the effort if it helps them avoid foreclosure and stay in their home.

Partial Claim Loans to Catch Up on Mortgage Payments

A partial claim is an interest-free loan backed by HUD that helps homeowners bring their mortgage payments up to date and avoid foreclosure. Through this program, HUD steps in to pay the overdue amount on your behalf, providing funds directly to your lender. These funds are sourced from FHA mortgage premiums paid by borrowers.

Partial claims are secured with a zero-interest promissory note, which is a legal agreement to repay the loan in the future. This loan can cover up to 30% of your mortgage’s unpaid principal balance, giving you a chance to get your mortgage back on track without making an immediate lump-sum payment.

You don’t need to repay the partial claim loan right away. Instead, repayment is only required when you sell or refinance your home in the future. This makes partial claims a helpful tool for homeowners who need immediate assistance to avoid foreclosure while working toward long-term financial stability.

What Are the Eligibility Requirements for Partial Claim Loans?

A partial claim loan can help homeowners who are struggling to catch up on their mortgage, but not everyone qualifies. To be eligible, you need to meet specific requirements. 

Mortgage servicers will review your financial situation and determine whether you qualify for a standalone partial claim. To qualify for a partial claim loan, you generally must:

• Be 4–12 months behind on your mortgage payments

• Show that you have enough income to resume your regular monthly payments

• Live in the property as your primary residence (owner-occupied)

If you’re unsure about your eligibility, contacting your lender is a good first step. They can explain your options and help you explore whether a partial claim loan could work for your situation.

What You’ll Need To Apply for the Partial Claim Program

HUD can advance your lender up to 12 months of mortgage payments — including your principal, interest, taxes, and insurance — through the partial claim program. To give your lender the information they need to evaluate your application, it’s important to gather key financial documents, such as:

• Proof of income (like pay stubs or tax returns)

• A financial hardship budget

• Information about your debts and bank statements

Be prepared to submit any additional paperwork your lender requests promptly. This will help keep the process moving smoothly and improve your chances of qualifying for assistance.

What Is a COVID-19 Partial Standalone Claim?

The COVID-19 National Emergency Standalone Partial Claim was a temporary option created by the FHA to help homeowners impacted by the pandemic. 

It allowed eligible borrowers to bring their mortgages current by moving past-due amounts into a zero-interest junior lien. This lien doesn’t need to be repaid until the home is sold, refinanced, or the mortgage is paid off. 

While this specific option is no longer available for new cases, homeowners impacted by COVID-19 may still qualify for other FHA loss mitigation options, such as loan modifications or the COVID-19 Recovery Option. Contacting a HUD-approved housing counselor or your mortgage servicer can help you explore the relief options still available.

Let’s Summarize…

If you’re struggling to make your mortgage payments, help is available. HUD and the FHA offer several relief options for homeowners with FHA-insured mortgages to avoid foreclosure and get back on track.

Acting quickly is key. FHA-backed mortgage servicers are required to offer programs like payment deferrals, reductions, or modifications to assist borrowers facing financial hardship. Connecting with a HUD-approved housing counselor is a great first step to explore affordable options and find the solution that works best for your situation.