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You may have a HUD partial claim against your Florida home if you have a mortgage backed by FHA and you’ve ever had any type of loan workout – including a loan modification.
What is a HUD partial claim?
A partial claim is an interest-free loan from HUD to help make a loan modification possible, or to get you caught up on overdue payments on an FHA loan. The partial claim does not need to be paid off until the property is sold or the first mortgage is paid off.
What happens if I sell my Florida home and I can’t sell for enough to satisfy the mortgage and the partial claim?
If the proceeds of the home sale are insufficient to pay off both loans, you will need to pay the remainder out of pocket or pursue a short sale. FHA has their own short sale process (FHA PFS Program). If you qualify for the program, you can sell the property for less than you owe and have the remainder of the debt forgiven.
The problem with partial claims is that they end up being far larger than expected by the homeowner, and usually this additional debt against the home lands the homeowner in a position where they are underwater and must consider a short sale.