Definition
A partial claim is a special interest-free loan from the U.S. Department of Housing and Urban Development (HUD) used to cover any arrears from a mortgage.
Analysis
A partial claim allows a borrower to postpone payment of any missed payments and fees through an interest-free loan. There are no payments due until the mortgage is paid. Additionally, there is no prepayment penalty.
Partial claims are limited to the equivalent of a maximum of 12 payments. The loan also must be restored to current status once the partial claim pays the arrears. HUD may provide up to $250 to the lender for documentation fees. Homeowners are not eligible for a partial claim if loan modification is an option.
Distressed homeowners must meet certain eligibility requirements. These include:
- the loan must be at least 120 days delinquent
- the borrower can reasonably afford the monthly payments
- the borrower must reside at the property
- the property must be maintained
- the borrower must be unable to repay the arrears through other arrangements
