The Hidden Cost of FHA Partial Claims: When Equity Runs Out
- Neil Caron
- 1 day ago
- 2 min read
Some homeowners are running out of equity—and options.
Since 2020, the Federal Housing Administration (FHA) has issued over 1.1 million stand-alone partial claims—zero-interest loans secured against a home—to help distressed homeowners catch up on payments and avoid foreclosure.
While this strategy has worked for many, a growing number of homeowners may now be facing a new problem: equity erosion.
According to public record data analyzed by ReadySetLoan, these partial claims may not be the long-term solution they were hoped to be—especially for homeowners who originated their loans in 2022 or later. Among that group, 29% are now underwater, and half have less than 10% equity in their homes.
“Partial claims can buy time, but they aren't always a cure,” says Neil Caron, Area Manager at CMG Mortgage. “They help during temporary setbacks, but for homeowners with ongoing hardship, they can quietly drain equity and limit future options.”
🐷 RSL Piggy Points
Partial claims don’t erase debt—they defer it. Borrowers still owe the balance, which comes due when the home is sold or refinanced.
FHA allows partial claims up to 30% of the unpaid balance of the first mortgage.
7% of homes with a claim are underwater, and another 6% are nearly there with under 10% equity.
Many homeowners used multiple claims—averaging 1.34 claims per property—which quickly adds up against equity reserves.
For those who faced only short-term setbacks—job loss, medical expenses, or temporary income gaps—partial claims often provided critical breathing room. But for others with long-term financial struggles, this solution may simply delay foreclosure while eating away at what little equity remains.
“At ReadySetLoan, we’ve seen how powerful education can be,” Caron adds. “That’s why we guide homeowners to understand the full picture, not just the short-term relief. Equity is a financial lifeline—protecting it is key.”
What You Can Do:
If you're a homeowner with a partial claim, or you’re considering one, it's crucial to understand how it affects your equity and what your long-term exit plan might be. Whether it's loan modification, renovation lending, or a strategic refinance, ReadySetLoan is here to help you explore your options before you're out of runway.
📣 RSL Perspective
As the number of “loss mitigation failures” increases—averaging 29,000 per month in 2024—many homeowners are nearing the limits of what FHA programs can do. It's time to take a proactive step. Your equity is too valuable to risk unknowingly.
Visit ReadySetLoan.com today to connect with our homeownership education team. We’ll help you make a plan that safeguards your equity and secures your future.
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