A one-time, interest-free loan from HUD advances you the funds you need to make the payments that will bring current and reinstate your mortgage. The loan covers delinquent amounts of principal, interest, insurance, and taxes. Because it does not pay the entire amount of your mortgage, it is a "partial" loan. When you sell or pay off your property, your loan comes due.
Who Is Eligible?
To qualify for a partial claim, you must be requesting assistance for the property that is your primary residence. In addition, you should be between four months and one year behind on your mortgage payments. It is possible still to qualify for the loan if you are more than twelve months behind if you are able to pay off the difference between the total amount overdue and what you owed at twelve months past due.
Once the partial claim loan helps you to pay off the delinquent amount of your mortgage, you must have sufficient resources to resume making your full mortgage payments. This requirement effectively means that it must be only the arrearage amount that is the cause of your current inability to make payments and not the regular requirements of your mortgage. Additionally, it is most likely that your lender will want to investigate and rule out other foreclosure-avoidance options, such as forbearance and loan modification, before helping you to pursue the partial claim option.
What Is the Process Involved in a Partial Claim?
As with any foreclosure-avoidance option, the first step in a partial claim is to speak with your lender. You may also wish to contact HUD consultants for additional information. HUD will require a "letter of explanation" from you that states the reasons why you have been unable to meet the financial obligation of your mortgage payments in the past. In this letter you should explain both your financial hardships and the steps you have taken to overcome them.
You will also need to state a demonstrable claim to HUD that you will be able to resume making full payments on your mortgage once you have received the partial claim. To this end, you will be required to provide proof of your current income and your lender will make an assessment of your financial status. Your lender will be looking for evidence that you are financially able to make the required mortgage payments for at least the next three months. During this process of evaluation you will need to submit copies of your tax returns and bank records for the past six months to two years.
The end result of the partial claim process should be that you avoid foreclosure and save your home.