A partial claim modification is a loss mitigation option available to borrowers with FHA-insured mortgages who are struggling to make their mortgage payments. This option is designed to help homeowners avoid foreclosure by deferring past-due mortgage amounts.

How does it work?

1. Eligibility: To qualify for a partial claim modification, the borrower must demonstrate financial hardship that has caused them to miss mortgage payments. The lender and FHA will review the borrower's financial situation to determine eligibility.
2. Deferral of Past-Due Amounts: The past-due mortgage payments are deferred to the end of the loan. This means that the borrower does not have to pay the missed payments immediately. Instead, they are added as a lump sum, which is due when the original mortgage term ends, the property is sold, or the loan is refinanced.
3. Interest-Bearing vs. Non-Interest Bearing:
   • Interest-Bearing Balloon Payment: The deferred amount may accrue interest, and this interest is typically calculated at the same rate as the original mortgage. The borrower will owe this amount plus any accrued interest at the end of the loan term.
   • Non-Interest Bearing Balloon Payment: In some cases, the deferred amount does not accrue interest. The borrower only owes the principal amount deferred, without additional interest, at the end of the loan term.
4. Resumption of Regular Payments: After the partial claim is processed, the borrower resumes making regular monthly mortgage payments as per the original loan terms. The goal is to bring the mortgage current, allowing the borrower to stay in their home and maintain the mortgage in good standing.

Benefits of a Partial Claim Modification

• Avoiding Foreclosure: By deferring the past-due amounts, borrowers can avoid foreclosure and stay in their homes.
• Stabilizing Monthly Payments: Borrowers can return to making their regular mortgage payments without the immediate burden of catching up on missed payments.
• Financial Relief: The deferral of past-due amounts provides financial relief to borrowers facing temporary financial difficulties.

Considerations

• Balloon Payment: Borrowers must be aware that they will eventually need to pay the deferred amount. Planning for this balloon payment is crucial to avoid financial strain in the future.
• Modification Terms: Understanding whether the deferred amount is interest-bearing or non-interest-bearing is important for financial planning.

Steps to Apply for a Partial Claim Modification

1. Contact the Loan Servicer: Borrowers should contact their loan servicer to discuss their financial situation and explore loss mitigation options.
2. Provide Documentation: The borrower may need to provide financial documents, such as proof of income, a hardship letter, and other relevant information.
3. Review and Approval: The loan servicer and FHA will review the application. If approved, the terms of the partial claim modification will be outlined, including the amount deferred and whether it is interest-bearing or non-interest-bearing.

Partial claim modifications are a valuable tool for FHA borrowers facing financial difficulties, providing a pathway to stabilize their mortgage and avoid foreclosure while planning for future financial responsibilities.

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At The Law Center, we are a team of specialists that are passionate and up to date about the foreclosure and loan modification process from start to finish and helping homeowners at the highest level. Our staff and attorneys approach each client and each property as a new challenge, one that requires thorough analysis, zealous representation, and thoughtful strategy. It’s your home, let The Law Center help you defend it.

Call us now and speak with a foreclosure expert on how you can make the foreclosure process work for you -- not against you. (312) 600-8815

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