What Is a Partial Claim Deed of Trust for FHA Loans?

A partial claim deed of trust is a zero-interest second lien that HUD places on your home when your mortgage servicer uses FHA insurance funds to cure the arrears on your FHA-insured loan. Instead of letting the default push you toward foreclosure, the servicer advances the past-due amount, FHA reimburses the servicer, and HUD secures what it paid out as a silent junior lien against your property. You owe nothing on it month to month. The balance sits behind your first mortgage and comes due only when you sell, refinance, transfer title, or finish paying off the primary loan.

How the Lien Gets on Your House

When you fall behind on an FHA mortgage and your servicer decides a partial claim is the right fix, the servicer advances money to cover the arrearage. That includes past-due principal, interest, and the taxes and insurance held in your escrow account. The servicer then files a claim with FHA’s Mutual Mortgage Insurance Fund and gets reimbursed for the advance.¹

HUD does not treat that payment as a gift. You sign two documents in favor of the Secretary of HUD: a promissory note for the amount advanced, and a deed of trust that secures the note against your home. The deed of trust gets recorded in your county’s land records, so the lien is public. No interest accrues, so the balance never grows past the original advance.¹

Your first mortgage goes back to current status as if you had never missed a payment. You resume the original monthly amount on the original schedule. The partial claim lien stays quiet in second position until something triggers repayment.

When You Have to Pay It Back

The partial claim is a deferred lump-sum debt. There are no monthly payments, but the full balance becomes due when any of these happens:

You sell the property. The lien must be satisfied from sale proceeds at closing.
You refinance. The new loan has to pay off the partial claim along with the first mortgage.
Someone assumes the mortgage.
You transfer title in any other way.
Your primary mortgage reaches maturity, meaning you make the last scheduled payment on it.

Because no interest accrues, you will owe exactly the original advance no matter how many years pass before the trigger.²

When the time comes, your title company or closing agent requests a payoff statement from HUD’s designated agent, and the partial claim gets paid off alongside the first mortgage. If a trigger occurs and the lien is not satisfied, HUD holds a recorded security interest and has the legal right to enforce it, including through foreclosure on the deed of trust.

One point catches sellers off guard. If your home has lost value and the sale price will not cover both the first mortgage and the partial claim, the partial claim creates an additional shortfall on top of whatever is already underwater on the primary loan. If a sale in a soft market is on the horizon, raise this with your servicer early.

Who Qualifies and How Much It Can Cover

Federal regulations set the baseline. Your mortgage must be FHA-insured, you must be at least four months behind, and your total arrearage cannot exceed the equivalent of 12 monthly mortgage payments.³

Beyond the thresholds, you have to show three things at once: that your current income can support the original monthly payment going forward, that you cannot catch up the arrearage on your own within a timeframe HUD considers reasonable, and that a loan modification would not produce a better result. That combination targets a specific borrower, someone who had a temporary setback, recovered enough to keep up with the regular payment, but cannot dig out of the backlog that built up during the hardship. HUD also requires a minimum number of payments on the mortgage before you are eligible, set case by case.³

Under guidance effective October 1, 2025, borrowers approved for a standalone partial claim must first complete a Trial Payment Plan, making the regular monthly payments on time, before the partial claim is finalized.⁴

The amount is capped. The statutory maximum for all partial claims on a single mortgage is 30 percent of the unpaid principal balance as of the date you first defaulted. That cap is set when the first partial claim is paid and does not change for the life of the loan. Any earlier partial claim on the same mortgage reduces what is available for a later one. The minimum partial claim amount is $1,000, except in cases tied to a Presidentially Declared Major Disaster.⁴

In practical numbers: if your unpaid principal balance was $250,000 when you defaulted, the lifetime partial claim ceiling is $75,000. If a first partial claim used $20,000, only $55,000 remains for any future one. When the arrearage exceeds what the partial claim can cover, the servicer moves on to other options.

Where It Fits Among FHA Loss Mitigation Options

A standalone partial claim is one tool, not the only one, and your servicer does not necessarily lead with it. HUD requires servicers to sort borrowers by whether they can afford the current monthly payment or need a lower one.

If you can resume your current payment, the servicer compares a standalone partial claim against a standalone loan modification and offers whichever preserves more partial claim funds for potential future use. In practice, if a 30-year loan modification at the market rate would not reduce your payment by at least a dollar, you get the standalone partial claim.⁴

If you cannot afford the current payment, the servicer looks at options that reduce it: a standalone loan modification, a combined loan modification and partial claim targeting at least a 25 percent reduction in principal and interest, or a Payment Supplement that uses partial claim funds both to cure the delinquency and to temporarily lower your payment for three years.⁵

The combined option matters because the deed of trust from the partial claim portion still gets recorded against your home the same way, even though your first mortgage terms are also changing.

If You Fall Behind Again Later

A partial claim resolves the immediate default, but it does not insulate you from future trouble. If you fall behind again, your servicer runs the same evaluation. There are limits, though. You can only receive one permanent home retention option within any 24-month period, unless a Presidentially Declared Major Disaster applies to you.²

The 30 percent lifetime cap also constrains a second episode. If the first partial claim used most of the available room, a second one may not fit, and the servicer will look at modifications or other options instead.

If your situation has changed permanently and you cannot sustain mortgage payments even with help, HUD offers disposition options. A pre-foreclosure sale lets you sell for less than the full balance owed, with the servicer accepting the shortfall. A deed-in-lieu of foreclosure lets you voluntarily transfer the property back to HUD in exchange for release from the mortgage obligation.²

Partial Claims and Chapter 13 Bankruptcy

If you are in Chapter 13, you can still receive a partial claim, but there is an extra step. The partial claim creates a new debt with a new creditor, HUD, so the bankruptcy court has to approve it. Your attorney or the servicer files a motion, and the court may hold a hearing on the impact to your plan. Trustees sometimes object, so approval is not automatic.

Because the partial claim carries no monthly payments and typically comes due well after the bankruptcy is completed, the trustee does not have to work those payments into the repayment plan. If your servicer offers you a partial claim while you are in bankruptcy, coordinate with your bankruptcy attorney on the court approval before signing the note or the deed of trust.

1
U.S. Department of Housing and Urban Development. Updates to Servicing, Loss Mitigation, and Claims
2
U.S. Department of Housing and Urban Development. FHA’s Loss Mitigation Program
3
eCFR. 24 CFR 203.371 – Partial Claim
4
U.S. Department of Housing and Urban Development. Mortgagee Letter 2025-12 – FHA Loss Mitigation Updates
5
U.S. Department of Housing and Urban Development. FHA Announces Updated Loss Mitigation Options