How Partial Claim Loans Help With Overdue Mortgage Payments

Struggling with your mortgage payments? You’re not alone. The U.S. Department of Housing and Urban Development (HUD) offers programs to help homeowners with FHA-insured mortgages avoid foreclosure.

Job loss and financial hardships don’t have to mean losing your home. HUD’s mortgage relief options can help you catch up on payments and stay where you belong.

You have options. Programs like loan modifications and partial claims exist specifically to help you through tough times.

What Happens When You Fall Behind on Mortgage Payments?

Your mortgage company gives you a deadline to catch up on missed payments. Miss that deadline, and they can begin the foreclosure process.

Understanding Foreclosure

Foreclosure means your lender takes back your home and sells it. Your mortgage creates a lien on your property. That lien gives your lender legal rights to repossess if you default.

The bank recoups its costs through the sale. You lose your home and damage your credit significantly.

Programs That Help You Avoid Foreclosure

HUD and the Federal Housing Administration (FHA) provide loss mitigation options. These programs help FHA-insured homeowners catch up and avoid losing their homes.

Your options make mortgage payments more manageable. You get a real chance to stay in your home.

Common loss mitigation options include:

• Loan modifications
• Forbearance agreements
• Repayment plans
• Partial claims

Each program has specific requirements and benefits. A HUD-approved housing counselor can help you choose the right option.

Contact your lender directly to explore your choices. They’re required to work with you if you have an FHA-insured mortgage.

Forbearance Agreements Give You Breathing Room

Forbearance temporarily reduces or pauses your mortgage payments. You get time to stabilize your finances without losing your home.

Once forbearance ends, you resume regular payments. Your lender may offer options to gradually repay missed amounts.

Forbearance works best for temporary financial setbacks. You need reasonable confidence you’ll recover financially within the forbearance period.

Repayment Plans Help You Catch Up

Repayment plans spread your missed payments over several months. You add a portion of overdue amounts to your regular monthly payment.

You’re making two payments in one: your current mortgage plus catch-up amounts. The plan brings your loan current without requiring a large lump sum.

Repayment plans work well if you’re behind by a few months. You need steady income to afford the increased monthly payment.

Loan Modifications Lower Your Monthly Payment

Loan modifications change your mortgage terms to make payments affordable. Your lender might lower your interest rate or extend your loan term.

You request modifications directly from your lender. They evaluate your financial situation to determine eligibility.

The process takes time but can save your home. Avoid scam companies promising quick fixes. Work directly with your lender or a trusted housing counselor.

Partial Claim Loans Bring Your Mortgage Current

A partial claim is an interest-free loan from HUD. It pays your overdue mortgage balance directly to your lender.

HUD funds these loans through FHA mortgage insurance premiums. The loan can cover up to 30% of your unpaid principal balance.

You sign a zero-interest promissory note to repay the loan. Repayment isn’t required until you sell or refinance your home.

No immediate payment means no added monthly burden. You catch up on your mortgage without new monthly expenses.

Partial claims provide breathing room while you rebuild financial stability. You avoid foreclosure and keep your home.

Qualifying for Partial Claim Loans

Partial claim loans have specific eligibility requirements. Not every struggling homeowner qualifies for this program.

Your mortgage servicer reviews your financial situation. They determine if you meet the criteria for a standalone partial claim.

To qualify, you generally must:

• Be 4-12 months behind on mortgage payments
• Demonstrate sufficient income to resume regular monthly payments
• Live in the property as your primary residence

Unsure about eligibility? Contact your lender immediately. They can explain your options and help you understand available programs.

Documents You’ll Need for Your Application

HUD can advance up to 12 months of payments to your lender. Payments cover principal, interest, taxes, and insurance.

Gather these key financial documents:

• Proof of income (pay stubs or tax returns)
• A detailed financial hardship budget
• Information about debts and bank statements

Submit any additional paperwork your lender requests promptly. Quick responses keep the process moving and improve approval chances.

COVID-19 Partial Standalone Claims

The COVID-19 National Emergency Standalone Partial Claim helped pandemic-affected homeowners. It moved past-due amounts into a zero-interest junior lien.

The junior lien required no repayment until sale, refinance, or payoff. That specific program is no longer available for new cases.

Pandemic-impacted homeowners still have options. Other FHA loss mitigation programs remain available, including loan modifications and recovery options.

Contact a HUD-approved housing counselor to explore current relief programs. Your mortgage servicer can also explain what assistance you still qualify for.

Take Action Before It’s Too Late

Help exists if you’re struggling with mortgage payments. HUD and FHA offer several relief options for FHA-insured mortgages.

Quick action is essential. FHA-backed mortgage servicers must offer programs like payment deferrals, reductions, or modifications.

Connect with a HUD-approved housing counselor immediately. They’ll help you explore affordable options and find solutions that work for your situation.

Don’t wait until foreclosure proceedings begin. The earlier you act, the more options you’ll have available.