A HUD partial claim payoff clears the interest-free second lien HUD placed on your home when it advanced funds to cure a past mortgage delinquency. You request the payoff figure from HUD’s servicing contractor, pay it by cashier’s check (HUD does not accept wire transfers), and then make sure the lien release is recorded with your county. The full balance becomes due when you sell, refinance, transfer title, let someone assume the mortgage, or make the final payment on your first mortgage.
When the Balance Comes Due
The partial claim sits quietly against your property, at zero interest and with no monthly payment, until one of a few specific events forces repayment. According to HUD, the balance becomes due and payable at the earliest of:1HUD.gov. FHA’s Loss Mitigation Program
- Sale of the property.
- Refinance of the first mortgage.
- Assumption of the FHA mortgage by another borrower.
- Any transfer of title, including adding or removing someone from the deed or title passing to heirs.
- Payoff of the first mortgage at maturity.
The title-transfer trigger catches families off guard. If a borrower dies and the home passes to an heir, the partial claim lien travels with the property, and the heir has to resolve it before the title is clear.
Voluntary termination of your FHA mortgage insurance can also require immediate repayment, depending on the terms of the promissory note you signed. Your servicer is required to warn you about this before processing the termination.2HUD. Updates to Servicing, Loss Mitigation, and Claims
Who Actually Holds the Lien
Your original mortgage servicer processed the partial claim, but HUD holds the subordinate mortgage itself. HUD contracts servicing of these liens to Information Systems & Networks Corporation (ISN).3HUD.gov. Secretary-Held Mortgage Servicing Contractors Your regular mortgage servicer cannot issue the payoff statement or take the money. Contacting them for the payoff wastes time you may not have if a closing is scheduled.
Requesting the Payoff Statement
You, your closing agent, or your attorney can request the payoff through HUD’s SMART Integrated Portal (SIP), which lets borrowers, lenders, title companies, and authorized third parties create accounts and submit requests. You can also email Answers@hud.gov.3HUD.gov. Secretary-Held Mortgage Servicing Contractors Include the partial claim loan number and the anticipated payoff date.
Because the lien carries no interest, the payoff is the original principal advanced, nothing more. The statement confirms that figure and gives you the exact payment instructions. Payoff quotes are only valid for a limited window, so if your closing slips, request a fresh statement instead of relying on the old one.
How to Pay It
Here is the part that regularly derails closings: HUD does not accept wire transfers for partial claim payoffs. Payment must be made by cashier’s check or certified funds, payable to the Department of Housing and Urban Development.3HUD.gov. Secretary-Held Mortgage Servicing Contractors
Mail the check to:
ISN Corporation
Attn: Partial Claim Cash Management
2000 N Classen Blvd, Suite 3200
Oklahoma City, OK 73106
In a sale, the title company draws the payoff from the sale proceeds and cuts the cashier’s check. In a refinance, the new loan funds it. Either way, tell your closing agent about the no-wire rule the moment you know you have a partial claim on the property. Title companies used to wiring mortgage payoffs sometimes learn about this restriction the day of closing, and the scramble to issue a cashier’s check and get it in the mail can push a closing back several days.
Getting the Lien Off Your Property Records
Paying the balance is only half the job. The subordinate mortgage still shows on your property records until a release is filed. After ISN processes the payment, the servicer provides a lien release or satisfaction of mortgage.2HUD. Updates to Servicing, Loss Mitigation, and Claims That document has to be recorded with the county recorder or register of deeds where the property sits.
In a sale or refinance closing, the title company handles the recording as part of its normal work. If you paid off the partial claim outside a transaction, you may need to record the release yourself or hire a title company to do it. Recording fees vary by county and are generally modest.
Keep a copy of the recorded release. If a future title search flags the old lien, that document saves you from hunting down proof years later. If more than 60 days pass after your payoff without a release arriving, follow up through the SMART Integrated Portal or at Answers@hud.gov.
Short Sales: The Partial Claim Still Gets Paid in Full
If you can’t sell the home for enough to cover the first mortgage, FHA’s Pre-Foreclosure Sale option lets the servicer accept less than the full first mortgage balance.1HUD.gov. FHA’s Loss Mitigation Program Even so, HUD requires any outstanding partial claim to be paid in full. The servicer deducts the partial claim from net sale proceeds and sends those funds to HUD’s contractor before the rest goes to the first mortgage lender.2HUD. Updates to Servicing, Loss Mitigation, and Claims The first mortgage lender absorbs the shortfall; the partial claim does not.
Forgiven first mortgage debt in a short sale can be treated as taxable income. The federal exclusion for mortgage debt forgiven on a principal residence covered debt forgiven through December 31, 2025. For short sales closing in 2026, the forgiven portion may be taxable unless Congress extends the relief or you qualify for another exclusion, such as insolvency under the Internal Revenue Code. This is a first-mortgage issue, not a partial claim one.
Future FHA Loans After a Partial Claim
A partial claim is reported in the Credit Alert Interactive Verification Reporting System (CAIVRS), the federal database of borrowers who have received claims under government loan programs. It appears as a “claim paid” code and stays in CAIVRS for three years.4HUD OIG. US Department of Housing and Urban Development Audit Report
During those three years, the CAIVRS record makes you ineligible for a new FHA-insured mortgage. That matters if you’re selling the current home and hoping to buy another with FHA financing, or if you pay off the partial claim and want to reuse FHA later. The three-year clock runs from when HUD paid the claim, not from when you pay off the lien. Plan your timeline accordingly.
Conventional loans and VA loans use their own underwriting standards and do not read CAIVRS the same way, so a partial claim entry does not automatically block you from non-FHA products.