FHA Partial Claim 2026: How the Loss Mitigation Option Works and Who Qualifies

The FHA partial claim is a loss mitigation tool that allows a servicer to advance funds to bring a delinquent borrower current, with repayment of those funds deferred to a junior lien paid off when the borrower sells or refinances. It was used extensively during COVID forbearance exits and remains one of FHA's primary tools for helping borrowers who miss payments due to hardship.

How the Partial Claim Works

When a borrower exits forbearance or becomes eligible for loss mitigation, HUD may authorize the servicer to file a partial claim on HUD's behalf. The partial claim amount covers missed principal and interest payments. HUD pays the servicer, and a zero-interest junior lien is placed on the property for that amount. The borrower resumes regular payments on the first mortgage and does not repay the partial claim until they sell, refinance, or pay off the first mortgage.

Eligibility Requirements

• ✦The first mortgage must be FHA-insured
• ✦The borrower must demonstrate ability to resume regular monthly payments
• ✦The partial claim cannot exceed 30% of the unpaid principal balance at the time of default
• ✦The servicer must obtain HUD authorization before filing the partial claim
• ✦Borrowers who have already used a partial claim may be eligible for a subsequent one if conditions are met

Impact on Future Refinancing

A partial claim creates a recorded junior lien that must be addressed at any future refinance. The junior lien does not accrue interest but is a real lien that affects CLTV. When a borrower with a partial claim wants to refinance into an FHA Streamline or rate-and-term refi, the partial claim lien is included in the CLTV calculation. The FHA Streamline does not require a full payoff of the partial claim, but conventional and cash-out refis do.