Over the last few years, the Federal Housing Administration (FHA) has helped more than a million distressed homeowners avoid foreclosure through a tool called the partial claim. While this option has kept many New Jersey families in their homes, it may no longer be the safety net it once was.
At NJ House Partners, we’ve started seeing more and more homeowners in Bergen County and across New Jersey reaching the end of their options. If you’re struggling to make payments and relying on FHA support, here’s what you need to know about the current state of partial claims — and why time may be running out. ⏳
🤔 What Is a Partial Claim?
A partial claim is a zero-interest, junior lien loan from HUD that helps bring delinquent FHA borrowers current. Instead of making a lump sum payment, the homeowner accepts a loan secured against the property. It’s payable when the first mortgage is paid off — usually through a refinance or sale.
FHA allows up to 30% of the unpaid principal balance to be used through one or multiple partial claims.
✅ Why It Worked — Until Now
For homeowners facing short-term hardships, partial claims made sense:
- ❌ No foreclosure
- 💰 No immediate payment
- 🏡 Equity preserved (in theory)
But that’s changing. 📉 New data shows that this tool is losing its effectiveness, especially for loans made in 2022 and later — near the peak of the housing market.
⚠️ Equity Drain: The Hidden Danger
Many New Jersey homeowners don’t realize they’re trading equity for time. According to recent national data:
- 📉 Properties with partial claims have, on average, $27,000 less equity than those without
- 🛑 7% of homes with partial claims are underwater
- ⚖️ 6% have less than 10% equity
For newer loans:
- 🚨 29% of partial claim homes from 2022 or later are underwater
- ⚠️ 50% have marginal equity (10% or less)
In short: if your financial hardship is long-term, a partial claim may only delay the inevitable — and leave you with nothing when it’s time to sell. 💸
📊 NJ Homeowners Are Running Out of Room
According to the National Association of Realtors, nearly 1 in 3 first-time homebuyers nationally use FHA loans — and New Jersey is no exception. With the popularity of FHA financing across the state and programs like NJHMFA offering FHA-insured mortgages, a significant share of New Jersey homeowners are exposed to the risk of rising defaults.
While Bergen County-specific FHA data is limited, the trend is clear: many local homeowners who bought in the last few years may now find themselves at or near their FHA partial claim limits, especially if they purchased near peak pricing or have experienced ongoing financial hardship.
According to HUD, in 2024 there were over 29,000 failed loss mitigation attempts each month — up 53% from the year before. That means more homeowners are:
- 🚫 Exhausting their partial claim limits (13% already have)
- 🛑 Failing to qualify for any further FHA workout options
In New Jersey, where property values have plateaued or even dipped in some areas, this is a serious risk. ⚠️
🛠️ Your Options in New Jersey
If you’re in preforeclosure or behind on your FHA loan, it’s critical to understand all your options:
1️⃣ Sell While You Still Have Equity
If your home still has value, selling now could help you walk away with cash in hand 💵 rather than nothing. At NJ House Partners, we work with homeowners to:
- 🧹 Sell as-is, even if the property needs work
- 🚫 Avoid showings, cleanouts, and costly repairs
- ⚡ Close quickly with either a cash buyer or traditional listing
2️⃣ Consider a Hybrid Sale
As a licensed NJ real estate agent and local investor, I can offer flexible options:
- 📈 List your home traditionally for top dollar
- 💼 Or make a cash offer and close fast
3️⃣ Explore Government Resources
📩 Don’t ignore notices from your lender. Call FHA or a HUD-approved housing counselor. But also speak to a local expert who can provide real-world solutions right here in New Jersey.
🔚 Bottom Line for NJ Homeowners
The partial claim well is running dry — especially for those who bought during or after 2022. If you’re behind on payments, don’t wait until your equity is gone and foreclosure is your only option. ⏰
🏠 Call Kevin Hill at (201) 214-1349 or visit www.NJHousePartners.com to explore your options today.
Let’s work together to protect your biggest asset: your home. 🛡️