FHA Seeks Feedback on a New Repayment Option for Borrowers
Issue Date: July 24, 2026
The Federal Housing Administration (FHA) has posted a draft policy that would give lenders a new way to handle partial claims, a change that responds to a problem NAR members have raised: hidden liens that surface late in a transaction and hold up closings. FHA is accepting stakeholder feedback through September 3, 2026.
A partial claim is one of FHA's main tools for helping a borrower who has fallen behind get current again. FHA advances the past-due amount, and today that debt is secured by a separate note and a subordinate mortgage recorded against the home. Because the partial claim usually does not show up on the borrower's monthly statement, sellers and their agents often do not learn it exists until it appears in a title search, sometimes just before closing, forcing a scramble to track down and release the lien.
Under the proposal, lenders could instead secure the past-due amount through a non-interest-bearing balance under the existing FHA-insured mortgage, documented with a repayment agreement rather than a recorded subordinate mortgage. The borrower would still repay the balance when the home is sold or refinanced, but there would no longer be a separate lien to locate and release at closing. FHA calls this option the Reinstatement Advance Payment (RAP). The proposal is intended to reduce administrative burdens for lenders while also making future sales, refinances, and assumptions easier to complete.
Participation in the RAP demonstration would be voluntary. Mortgagees that choose to participate could decide whether to use a RAP for individual partial claims, meaning some borrowers could still have traditional recorded partial claim liens depending on their servicer's practices.
The proposal follows feedback NAR shared with FHA after members reported transactions stalling because undisclosed partial claim liens were discovered late in the closing process. NAR will submit comments on the draft policy and will continue working with FHA as the agency finalizes the guidance.