Why Is There a HUD Lien on My House? Partial Claims and HECMs

A HUD lien on your house almost always comes from one of three federal housing programs: an FHA partial claim that covered missed mortgage payments, a HUD-insured reverse mortgage, or an FHA loan that went into default and was assigned to HUD. Each one puts the U.S. Department of Housing and Urban Development on your title as a lienholder, and each has its own rules for when and how it gets paid off.

FHA Partial Claims

This is the most common reason HUD’s name shows up in property records. If you fell behind on an FHA-insured mortgage, your servicer can use HUD’s loss mitigation program to bring the loan current instead of moving toward foreclosure. HUD advances the money to cover your missed payments, and that advance is secured as an interest-free subordinate lien on your home.¹ You end up with a second lien held directly by HUD, sitting behind your primary FHA mortgage.

You don’t make monthly payments on a partial claim. It only becomes due when you make your final mortgage payment, sell the home, transfer title, have someone assume the mortgage, or complete certain kinds of refinance.¹ That last trigger surprises people. Refinancing your primary mortgage can bring the whole partial claim balance due at closing.

COVID-Era Partial Claims

Many of these liens were recorded after the pandemic. Homeowners who entered COVID-19 forbearance on FHA loans were often offered a COVID-19 Recovery Standalone Partial Claim to get current again. It works the same way as a standard partial claim, but HUD capped the amount at 30 percent of the unpaid principal balance at the time of default, minus any previous partial claims already paid.² If you went through forbearance and resumed regular payments without digging into the paperwork, the subordinate lien is likely still on your title. It won’t cause problems until a title search runs during a sale or refinance.

Reverse Mortgage (HECM) Liens

Home Equity Conversion Mortgages are FHA-insured reverse mortgages available to homeowners 62 and older.³ The loan lets you draw cash from your home equity without making monthly payments; the balance grows over time and becomes due when you move out, sell, or die. The reverse mortgage itself is a lien on the property. If HUD takes assignment of the loan from the original lender, HUD becomes the lienholder directly.

A HECM can also be called due and payable before any sale or move if you stop meeting basic obligations. Falling behind on property taxes, letting homeowner’s insurance lapse, or not keeping the home in reasonable repair can all trigger default.⁴ When that happens, the lender must give you 30 days’ notice and a chance to fix the problem before moving toward foreclosure.⁵ Correcting the issue inside that window can stop the process.

FHA Loan Default and Assignment

When a borrower defaults on an FHA-insured mortgage and the lender files an insurance claim, HUD may pay the lender and take assignment of the loan. At that point HUD itself holds the primary mortgage lien on your property. The Federal Housing Administration, which is part of HUD, insures these loans to reduce lender risk and expand access to homeownership.⁶ If your loan reaches this point, your lienholder is the federal government rather than a private bank. A HUD lien from a full loan assignment usually means earlier loss mitigation options like a partial claim either weren’t offered or didn’t work.

How to Confirm the Lien

Start with your county recorder or county clerk’s office. Most have searchable online databases of recorded liens and property transactions. Look for any document naming the U.S. Department of Housing and Urban Development or the Secretary of Housing as the lienholder. A title search company can pull the same information, typically for $75 to $200, and produce a full chain-of-title report.

For liens HUD holds directly, contact HUD’s National Servicing Center. General questions about a partial claim, subordination, or lien release go to the FHA Resource Center at 1-800-225-5342 or answers@hud.gov, Monday through Friday, 8:00 a.m. to 8:00 p.m. Eastern.⁷

Selling or Refinancing With a HUD Lien

A HUD lien has to be dealt with before you can transfer clear title or close on a new loan. How that happens depends on the type of lien and what you’re doing.

On a sale, the partial claim or HECM balance is paid from the proceeds at closing. Your title company or closing attorney will request a payoff statement from HUD in advance. For HECMs assigned to HUD, the payoff request must be in writing and include the ten-digit FHA case number, the full property address, the borrower’s name, and the anticipated payoff date. HUD does not accept wire transfers for HECM payoffs.⁸ Partial claim payoffs can be submitted online through Pay.gov.⁷

On a refinance, the partial claim balance typically becomes due at closing because a refinance counts as one of the repayment triggers.¹ In some cases HUD may agree to subordinate its lien to the new first mortgage instead of demanding payoff, but that runs through HUD’s National Servicing Center and is not guaranteed. If you’re refinancing into another FHA loan, ask your loan officer early whether the partial claim can be folded into the new loan or has to be paid off.

What Heirs and Surviving Spouses Need to Know

If the HUD lien on the house is a reverse mortgage and the borrower has died, the loan becomes due and payable. The lender must notify the estate and heirs within 30 days, and the heirs then have 30 days from that notice to decide how to proceed.⁵

Heirs generally have four options:

Pay the full balance, including accrued interest and mortgage insurance premiums, and keep the home.
Sell the property for at least 95 percent of its current appraised value, apply the net proceeds to the debt, and walk away. If the loan balance exceeds the home’s value, FHA insurance covers the shortfall.⁵
Sign a deed in lieu of foreclosure, transferring the property to the lender to satisfy the debt.
Request a timeline extension of up to six months to arrange a sale or financing.⁹

The 95 percent rule matters. Heirs are not personally liable for a reverse mortgage balance that exceeds the home’s value.

Surviving Spouses Who Weren’t on the Loan

A surviving spouse who wasn’t a borrower on the HECM can still stay in the home, but only as an Eligible Non-Borrowing Spouse under specific conditions. The spouse has to obtain legal ownership or a life estate in the property after the borrower’s death, the property has to have been the spouse’s principal residence both before and after the death, and the spouse has to keep meeting all mortgage obligations including taxes, insurance, and maintenance.¹⁰ Miss any of those and the deferral ends and the loan becomes due. Getting an attorney involved early can prevent a surviving spouse from losing the home over a paperwork gap.

Settling a HUD Lien for Less Than You Owe

If you can’t pay a HUD-held lien in full, HUD’s Debt Resolution Program may let you settle for less. HUD has authority under the National Housing Act to compromise debts owed to it when doing so serves the government’s interests.¹¹ HUD cannot forgive a debt entirely, but it can accept a reduced lump sum.

There are two types of settlement. A compromise offer releases all parties and closes out the entire claim. A partial settlement offer releases only the person who settles, and HUD keeps the right to pursue any remaining co-borrowers.¹¹ You’ll submit a detailed financial statement with supporting documents and your most recent federal tax return. HUD generally expects a lump sum, though short-term payment plans are sometimes accepted.

One tax point to plan for: any balance HUD writes off in a compromise offer gets reported to the IRS as income, so you could owe income tax on the forgiven amount. Work that number into your decision before you accept a settlement.

1
U.S. Department of Housing and Urban Development (HUD). FHA’s Loss Mitigation Program
2
U.S. Department of Housing and Urban Development. Mortgagee Letter 2025-12
3
Consumer Financial Protection Bureau. Can Anyone Take Out a Reverse Mortgage Loan
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U.S. Department of Housing and Urban Development (HUD). HUD FHA Reverse Mortgage for Seniors (HECM)
5
eCFR. 24 CFR 206.125 – Acquisition and Sale of the Property
6
U.S. Department of Housing and Urban Development (HUD). Helping Americans Loans
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U.S. Department of Housing and Urban Development (HUD). SFH National Servicing Center
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U.S. Department of Housing and Urban Development. How Do I Request a Payoff Statement of a HECM Reverse First Mortgage Assigned to HUD
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Consumer Financial Protection Bureau. With a Reverse Mortgage Loan, Can My Heirs Keep or Sell My Home After I Die
10
eCFR. 24 CFR Part 206 Subpart B – Eligible Borrowers
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U.S. Department of Housing and Urban Development. Debt Resolution Program Settlement Offer