If you have an FHA-insured mortgage and are having trouble making your mortgage payments, the US Department of Housing and Urban Development (HUD) may have programs to help. In this article, we discuss HUD's programs for homeowners who are in mortgage default due to job loss or financial hardship related to COVID-19. If you qualify for one of these programs, you may be able to save your home and prevent foreclosure.
AuthorTory Bramble MP.
Updated May 11, 2023
If you're a homeowner and struggling to make your mortgage payments, the US Department of Housing and Urban Development (HUD) may have programs that can help. HUD's program is designed to help people with government-backed FHA loans avoid foreclosure. In this article, we discuss HUD's programs for homeowners who are in mortgage default due to job loss or financial hardship related to COVID-19. If you qualify for one of these programs, you may be able to save your home and prevent foreclosure.
What happens when a homeowner defaults on their mortgage
If you default on your mortgage, your mortgage company will give you a deadline to make up the missing payments so you can avoid foreclosure. If you can't meet the obligations or enter into some other agreement with your lender, the mortgage company canForeclosure on your home. In foreclosure, the bank or mortgage company takes over your home and sells it to cover the costs. Your mortgage lender or loan originator has the legal right to do this because mortgage loans generatelienIf you keep the loan, the lender can repossess the property.
There are two types of enforcement - judicial enforcement andextrajudicial enforcementthrough sales. ONECourt enforcementIs a lawsuit that arises when the mortgaged real estate is sold with the permission of the court. But homeowners will have the ability to fight foreclosure in court to prevent that from happening. Although both types of foreclosures are available in all states, the only way for a bank to foreclose on property in some states is through judicial foreclosure. Since the lender does not have to go through the court system in the case of an out-of-court foreclosure, the process is usually much faster.
HUD plans to avoid foreclosure
HUD has partnered with the Federal Housing Administration (FHA) to provide homeowners with an extendedPossibilities of reducing losses. These programs are designed to collect payments from delinquent homeowners covered by the Federal Housing Administration (FHA) andAvoid protection. If a homeowner is ineligible for a special claim under the COVID-19 National Emergency, the Federal Housing Administration (FHA) uses a "waterfall method" to determine whether the homeowner is eligible for a refund. We will discuss some claims processes later.
Through the waterfall process, FHA screens homeowners who are ineligible for separate sub-requirements related to COVID-19 and selects them during the waterfall process. The goal of mortgage lenders is to provide borrowers with new mortgage payments that they can keep up with.
Some of the specific programs that HUD can help homeowners stay on include loan modifications, foreclosure agreements, repayment plans, and partial claim options. These programs have certain requirements. Don't think you can't qualify without first considering seeking professional advice from a HUD counselor and understanding your options. You may also consider contacting your lender. Whichever option you choose, it's best to ask for helpHandling foreclosuresinstead of ignoring it.
If you can't pay your mortgage and want to keep your home, consider lookingMortgage loan agreement. With a deferred payment agreement, you and your lender can agree to temporarily reduce or pause your mortgage payments. After the end of the contracted period, your regular installments of the mortgage loan will continue.
With a mortgage repayment plan, borrowers experiencing short-term financial difficulties can request additional time to pay off their mortgage. Typically, repayment plans are available to those who do not qualify for other loss mitigation options or do not wish to refinance their original loan. Through the program, borrowers who are months behind on their mortgage payments can get their accounts back in good standing in a relatively short period of time.
If you are facing financial difficulties and are unable to pay the monthly repayments according to the terms of the existing loan, you can request a loan modification. With a loan modification, you change the original terms of your mortgage loan by reducing the mortgage interest rate or extending the loan term. This can help you lower your monthly payment.
You can useChange of mortgage loanFix it yourself or get help from a reputable company. But beware of scams. The process can also take some time as your lender has to assess your financial situation.
Partial equity loans are interest-free, federally backed loans offered by HUD that homeowners can use to pay off their mortgages and avoid foreclosure. The HUD Partial Claims Program pays lenders to homeowners who have unpaid mortgages to avoid foreclosure. Financing comes from FHA mortgage premiums.
Portions of the claim are secured by HUD through zero-coupon debt securities. A promissory note is a written promise to pay a debt. A partial claim can pay up to 30% of the outstanding principal on your existing mortgage. If you sell or refinance your home after receiving a partial claim, you must pay back the partial claim.
Organized and submitted my petition... a little slow but done
Read more Google reviews ⇾
Fantastic service! Very easy to follow instructions and documentation.
Read more Google reviews ⇾
With Upsolve, it's a simple process. Thank you for your service.
Read more Google reviews ⇾
Get started with Upsolve
Eligibility conditions for installment loans
Partial payday loans are only available to consumers who are unable to renew their existing monthly mortgage payments. The mortgage lender can assess the borrower's separate portion of the claim. To qualify for a partial claim, a home borrower must:
Delay of mortgage loan from 4 to 12 months.
Show that they have enough income to cover their fixed monthly mortgage payments.
He lives in the property (resident of the owner).
So it's best to contact your lender to discuss late mortgage payments. If you don't ask your lender what your options are, you could lose your property. You should also know that HUD can defer up to 12 months of your mortgage (including principal, interest, taxes and insurance) to your lender through the Partial Exchange Program.
It's important to have all your financial documents together, including proof of income, a financial hardship statement, debts and bank statements that you can show lenders. This will give them the information they need to take a closer look at your financial situation and decide if you are eligible for a partial claim. If your lender asks you for additional documentation to evaluate your application, it's best to provide it immediately.
What is a partial stand-alone claim for COVID-19?
The FHA offers a National Emergency Separate Part of the Claims Assistance program for homeowners affected by the epidemic. This option is only available to homeowners whose mortgages are past due or less than 30 days past due as of March 1, 2020.
Partial stand-alone claims for COVID-19 are not the same as HUD partial claims. Claims for the National Self-Employed Emergency Department for COVID-19 are limited to 25% of the borrower's outstanding principal. It consolidates all of the borrower's past due mortgage amounts and places them in a separate lien for up to 25% of the outstanding mortgage principal. The primary lien must be paid off first when the home is sold or refinanced.
In order to qualify for a separate section request for COVID-19, borrowers must be able to prove to the FHA that they can continue to make timely mortgage payments. This requires you to submit your income and budget information to the FHA so it can determine if you qualify for this deduction. The loan modifies the rate and terms of an existing mortgage if the borrower qualifies for the program and lives in the property.
If you're behind on your mortgage payments and don't qualify for the other programs discussed earlier in this article or for separate COVID-19 claims, there are still ways to save your home. If you are ineligible to claim the separate component due to COVID-19, the Federal Housing Administration (FHA) will determine if you are eligible for mortgage forgiveness under the COVID-19 Homeowner Loan Modification.
If individuals do not qualify for either program, they may be eligible for a combination of a partial COVID-19 application and a loan modification. This loan modification allows partial claims of up to 30% of the outstanding principal. All remaining debts will be linked to the loan through a mortgage modification.
Finally, for homeowners who do not qualify for any of the partial claim and loan modification programs discussed above, a combination of loan modification and partial claim is available for the COVID-19 FHA HAMP.
Fortunately, HUD and FHA are offering mortgage relief options to homeowners with FHA-insured mortgages who are struggling financially, especially in light of the COVID-19 national emergency.
If you can't pay your mortgage, act now before it's too late. You can choose to save your home from foreclosure. FHA and government-backed mortgage lenders must offer the option of deferring or reducing mortgage payments to help borrowers with financial needs. Make sure you talk to someone who is qualifiedhousing advisorLearn about affordable retrofit options to fit your situation.
↑ back to top
Tory Bramble MP
Tori Bramble is a bankruptcy attorney with over 20 years of experience. Admitted to practice in Maryland and Virginia, she has helped more than 1,500 clients discharge thousands of dollars in debt and seek relief by filing Chapter 7 or Chapter 13 bankruptcy. Tori is a native of New York,...Learn more about attorney Tory Bramble
Learn more about the Upsolve team
- Must be in the form of a cashier's check, escrow check or certified funds.
- A copy of the payoff letter must be included with the funds.
- Make check payable to HUD and mail to:
If you do send a partial payment, your mortgage servicer may be permitted by law to either credit your partial payment to your account, return the payment to you without cashing it, or keep it in a “suspense account” until you've paid more money to equal the full periodic payment.Are there other ways to handle mortgage loan debt? ›
Refinance. Get a loan modification. Work out a repayment plan. Get forbearance.What is a partial loan modification? ›
A modification with a partial Claim is one where the lender breaks the loan into 2 loans. The Borrower makes monthly payments of principal and interest on the first loan, and the second loan or “Partial Claim” is a separate mortgage which does require monthly payments, and does not carry interest.Can a partial claim be forgiven? ›
No, you must first pay off your FHA Partial Claim before selling your property. If the borrower either sells their home or refinances, they must pay off the entire amount of the partial claim.Can you refinance with a partial claim? ›
A partial claim can pay up to 30% of your existing mortgage's unpaid principal balance. If you sell or refinance your house after a partial claim is granted, you'll be required to repay the partial claim.Can a mortgage company refuse partial payment? ›
Yes, the bank can refuse any partial payment that does not bring the loan current. You are required to pay the monthly amount specified under the terms of your loan contract. Review this contract for policies specific to your bank and your loan.How does a partial claim mortgage work? ›
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 remainder is added to the principal loan balance of your first mortgage and extends the term for 30 years (360 months) at a fixed interest rate.What is partial payment method? ›
Partial payment refers to the offering of a payment by check for less than the full amount claimed by the creditor. Such an offer for debt discharge by tender of a "payment-in-full" check is common practice.Will banks forgive mortgage debt? ›
Mortgage lenders are not in the business of forgiving debt. When you close on a house, executing your mortgage, it's with the expectation you will pay it back during the time allotted. Only when the lender is convinced you will be unable to pay it back will it concede to forgiveness provisions.
Home equity loan
You get a lump sum of money — often with closing costs taken out — that you can then use to pay off your debt or for any other purpose. You'll have a fixed monthly payment and a repayment schedule. Factors to consider: Usually offers a low, fixed rate.
A home equity loan can be a good option to consolidate debt, as it usually carries lower interest rates than other financing options. Borrowers need to have a healthy amount of home equity (at least 20%), along with good credit scores, to qualify for these loans.
During meetings with your lender, you can negotiate the interest rate, the term of the loan, late fees, and any good faith payment you are prepared to make. Remember that you may not be able to negotiate the principal or any amount that you still owe from before you applied for the loan modification.What are the cons of a partial claim? ›
For partial claim, you will have a lien on your property until you repay the loan, which may affect your ability to refinance or sell your home. You will also have to pay interest on the loan, which may add to your debt burden.What makes a borrower ineligible for a loan modification? ›
-The borrower's income was not sufficient to support the modified payment amount. -The borrower had already missed too many payments before applying for the modification. -The property value had declined, making it worth less than the outstanding loan balance.Do you make payments on a partial claim mortgage? ›
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.How do I get a VA partial claim payoff? ›
- You must have a VA-guaranteed loan.
- Your VA loan must have been current or less than 30 days past due on March 1, 2020 or originated on or after March 1, 2020.
- You received a COVID-19 forbearance and missed at least one payment under the terms of the original mortgage note.
During the trial period your credit score may be negatively impacted, particularly if your payments are not current. However, “Paying under a Partial or Modified Agreement” may be less negative than an ongoing series of late payments or foreclosure.How long does a partial payment stay on your credit file? ›
This shows future creditors that the debt was cleared for less than the full amount, and this could affect their decision about whether to lend to you. The account will be removed from your credit file six years after it was partially settled, or six years after the date it defaulted if this was earlier.