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

A partial claim deed of trust is the security instrument HUD records against your home when it uses FHA insurance money to cure your missed mortgage payments. It creates a zero-interest second lien, held by the Secretary of HUD, that sits behind your primary FHA mortgage. You make no monthly payments on it. The full balance comes due only when you sell, refinance, transfer title, let someone assume the loan, or reach the maturity date of your first mortgage.¹

How It Brings Your Loan Current

When you fall behind on an FHA-insured mortgage and cannot catch up on your own, your servicer can advance funds to cover the arrearage. That includes past-due principal, interest, and any taxes and insurance held in escrow. The servicer then files a claim with FHA’s Mutual Mortgage Insurance Fund to be reimbursed for what it advanced.²

That money doesn’t disappear. In exchange, you sign a promissory note payable to HUD and a deed of trust giving HUD a junior lien on your property. 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 what was originally advanced.²

Your primary FHA mortgage returns to current status as if you had never missed a payment. You resume the original monthly amount on the original schedule. The partial claim sits behind that first mortgage, owed to HUD, and waits.

Who Qualifies

Federal regulation sets the floor. Your mortgage must be FHA-insured, you must be at least four months delinquent, and your total arrearage cannot exceed the equivalent of 12 monthly mortgage payments.³

Beyond those numbers, you have to show three things at once:

Your current income supports the original monthly payment going forward.
You lack the resources to cure the arrearage yourself within a timeframe HUD considers reasonable.
You wouldn’t qualify for, or wouldn’t benefit from, a loan modification that rolls the arrearage into new terms.

That combination points at a specific borrower: someone who took a temporary hit, recovered enough to resume the regular payment, but can’t pay off the hole that opened up during the hardship. You also must have made a minimum number of payments on the mortgage, which HUD sets case by case.³

Under HUD 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

How Much It Can Cover

The statutory maximum for all partial claims combined on a single mortgage is 30 percent of the unpaid principal balance as of the date you first defaulted. That cap is fixed when the first partial claim is paid and stays constant for the life of the loan. Any earlier partial claim on the same mortgage reduces what’s left. The minimum partial claim is $1,000, with an exception for Presidentially Declared Major Disasters.⁴

In practical numbers: an unpaid principal balance of $250,000 at default caps your lifetime partial claim total at $75,000. If a first episode used $20,000, only $55,000 remains available later. The claim covers the arrearages needed to reinstate the mortgage; no other fees or costs go into it.²

When and How You Repay It

The partial claim is a deferred lump-sum obligation. You owe nothing month to month, but the entire balance is due when any of these happen:

You sell the property. The lien is satisfied from sale proceeds at closing.
You refinance. The new loan must pay off the partial claim along with the first mortgage.
Someone assumes the mortgage.
You transfer title in any form.
Your primary mortgage reaches maturity. The partial claim comes due with the final scheduled payment.

Because no interest accrues, the payoff amount is exactly what was originally advanced, no matter how many years have passed.¹

When one of those events approaches, the closing agent requests a payoff statement from HUD’s designated agent for the exact amount owed. Clearing the lien is a required step in any transaction that ends the original FHA mortgage. If the partial claim isn’t paid when a trigger occurs, HUD holds a recorded lien and can enforce it, including through foreclosure on the deed of trust itself.

One practical warning if you’re thinking about selling in a soft market: the partial claim adds to what has to be paid off at closing. If the sale price won’t cover both the first mortgage and the partial claim, you face a shortfall on top of whatever gap exists on the primary loan. Talk to your servicer before listing.

How It Fits With Other FHA Loss Mitigation Options

A standalone partial claim isn’t the only tool, and it isn’t automatically the first one offered. Servicers evaluate borrowers based on whether the current payment is affordable going forward.

If you can resume the current payment, the servicer compares a standalone partial claim against a standalone loan modification and offers whichever preserves more partial claim capacity for possible future use. If a 30-year modification at market rate wouldn’t drop your payment by even a dollar, you get the standalone partial claim.⁴

If you can’t afford the existing payment, the servicer evaluates you in this order:

Standalone loan modification, which recasts or extends the loan to reduce your monthly amount.
Combination loan modification and partial claim, which uses partial claim funds to cure the delinquency while a modification targets at least a 25 percent reduction in principal and interest, sometimes by extending the term to 40 years.⁵
Payment Supplement, which uses partial claim funds both to cure the delinquency and to cover part of the principal owed each month for three years, temporarily lowering the payment.

The combination option is worth knowing about because it stacks two tools. Partial claim funds cure the past-due amount and a modification changes the loan terms going forward.

If You Fall Behind Again

A partial claim solves the immediate crisis. It doesn’t protect you from a future one. If you become delinquent again, your servicer runs the same evaluation, but two limits kick in.

First, you can receive only one permanent home retention option within any 24-month period, absent a Presidentially Declared Major Disaster.¹ Second, the 30 percent lifetime cap constrains what’s left. If your first partial claim used most of that capacity, there may not be enough room for another one, and the servicer will look at modifications instead.

If your finances have changed permanently and no retention option is sustainable, HUD offers disposition options. A pre-foreclosure sale lets you sell for less than the 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.¹

If You’re in Bankruptcy

Chapter 13 borrowers can still receive a partial claim, but because it creates a new debt to a new creditor (HUD), the bankruptcy court has to approve it. The servicer or your attorney files a motion, and the court may hold a hearing on how the partial claim affects your plan. Trustees sometimes object, so approval is not automatic.

Since a partial claim requires no monthly payments, the trustee doesn’t need to build it into the plan, and the balance typically doesn’t come due until well after the bankruptcy closes. If you’re in Chapter 13 and your servicer proposes a partial claim, coordinate the court approval with your bankruptcy attorney before signing anything.

1
U.S. Department of Housing and Urban Development. FHA’s Loss Mitigation Program
2
U.S. Department of Housing and Urban Development. Updates to Servicing, Loss Mitigation, and Claims
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