A partial claim mortgage is a type of loan offered by the U.S. Department of Housing and Urban Development (HUD) to help homeowners with FHA-insured loans who are behind on their mortgage payments to avoid foreclosure. The partial claim is an interest-free loan that can be used to make the mortgage current and avoid foreclosure. The loan amount can be up to 30% of the unpaid principal balance of the mortgage as of the date of default, less the total arrearages. The partial claim can be used in several ways, including:

• Standalone Loan Modification: Resolves the outstanding mortgage payment arrearages by adding it to the principal loan balance of the first mortgage and extends the term of the mortgage to 360 months at a fixed interest rate.

• Standalone Partial Claim: Allows mortgage payment arrearages to be placed in a zero-interest subordinate lien against the property. The Partial Claim amount does not require payment until the last mortgage payment is made, the loan is refinanced, or the property is sold, whichever occurs first.

• FHA-HAMP Combination Loan Modification and Partial Claim: Establishes an affordable monthly payment, resolves the outstanding mortgage payment arrearages, and permanently modifies the first mortgage monthly payment. The Partial Claim is a zero-interest subordinate lien that will include a portion of the amount to be resolved and if you meet the requirements, a principal deferment.

The partial claim is secured by HUD through zero-interest promissory notes, which are written promises to pay back the debt. If the borrower sells or refinances the property after the partial claim is granted, they will be required to repay the partial claim. The partial claim can take the status of a second lien, making it repayable when the mortgage matures or is paid off.