What Is a Partial Claim on a Mortgage?
The U.S. Department of Housing and Urban Development, or HUD, offers homeowners with Federal Housing Authority (FHA) loans financial assistance to help pay past due mortgage payments through what it calls a partial claim. HUD does not automatically grant partial claims and applicants must meet certain requirements to obtain a partial claim payment.
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General Requirements
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To qualify for a partial claim on an FHA loan, borrowers must be at least four months behind on mortgage payments, but no more than 12 months behind. The home must also be the borrower's primary residence and must remain the borrower's primary residence if HUD should approve a partial claim payment. Borrowers must also provide an explanation as to the financial hardship that caused them to fall behind on their mortgage payments.
Financial Requirements
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Before HUD approves a partial claim, borrowers must demonstrate that they do not have the financial ability to become current on their past due mortgage payments through a loan modification program. To meet this requirement, the lender will often complete a financial assessment with the borrower to determine disposable or surplus income amounts. If these amounts are less than the amount needed to pay the past due mortgage amount, the lender may continue the partial claim process. Borrowers must also provide proof, such as paycheck stubs, that their income is enough to continue making regular mortgage payments.
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Documentation Requirements
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Specific documentation varies by lender. General documentation requirements for partial claim applicants include proof of income, such as paycheck stubs, W2s or 1009 forms, a financial hardship letter explaining the circumstances that led to missed mortgage payments, two to three years of federal income tax returns and three to six months worth of bank statements. Failure to provide the required documentation can result in the denial of a partial claim application.
Repayment Terms
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HUD secures partial claims through zero interest promissory notes. Once HUD grants a partial claim, it places a lien against the home for the amount of the claim. This means the borrower must pay off the partial claim when he sells his home. A borrower can make payments toward a partial claim at any time and without pre-payment or repayment penalties. HUD requires all borrowers to make partial claim payments by cashier's check or money order.
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