A Hidden FHA Lien Could Delay a Home Sale. A New Proposal May Help.
Originally published in a REALTOR® Association of Fox Valley newsletter. Republished here as part of Neeley Erickson’s Policy Commentary series.
Picture this: A home sale is moving right along. The inspection is complete, the buyer’s financing is approved, and everyone is preparing for closing day. Then the title search uncovers an FHA partial claim lien that the seller did not realize was still attached to the property.
Suddenly, the closing is delayed while the seller, lender, title company, and real estate professionals try to determine how much is owed and how the lien can be released.
These last-minute surprises are more common than many homeowners realize. That is why the Federal Housing Administration, or FHA, is proposing a change intended to make future FHA transactions smoother.
What Is an FHA Partial Claim?
When a homeowner with an FHA-insured mortgage falls behind on payments, FHA may provide assistance through a partial claim. This allows the mortgage servicer to advance funds on the homeowner’s behalf to cover the amount needed to bring the loan current.
The homeowner must eventually repay that assistance, typically when the home is sold, the mortgage is refinanced, or the original loan is paid off.
Currently, a partial claim is generally secured by a separate lien recorded against the property. The challenge is that the amount may not appear on the homeowner’s regular monthly mortgage statement. As a result, homeowners may forget about it or may not fully understand that a separate balance remains.
In some cases, the lien is not discovered until the title search shortly before closing.
As you can imagine, discovering an unexpected debt attached to your home is never anyone’s idea of a pleasant closing surprise.
A Proposed Alternative
To address the problem, FHA is proposing a new option called the Reinstatement Advance Payment, or RAP.
Instead of creating a separate recorded lien, the assistance would remain connected to the homeowner’s existing FHA mortgage. The homeowner would still be responsible for repaying the funds when the home is sold or refinanced, but there would no longer be an additional lien that must be separately identified and released before closing.
The goal is simple: fewer surprises, fewer closing delays, and a smoother experience for homeowners, buyers, lenders, title companies, and real estate professionals.
Turning Real-World Problems Into Better Policy
The proposal followed feedback from the National Association of REALTORS® about transactions delayed when partial claim liens were discovered late in the closing process. FHA is accepting public comments through September 3, 2026, before deciding whether to move forward.
Participation in the proposed program would be voluntary for mortgage servicers, so it would not eliminate every potential complication. Still, it represents a practical effort to address a problem that can create stress and unexpected delays for consumers.
Public policy is often associated with major legislation, but meaningful improvements can also come from fixing the everyday processes people encounter when buying or selling a home.
For homeowners, the most important lesson remains the same: before listing or refinancing a property, ask your mortgage servicer whether any partial claim or other assistance balance remains. Identifying it early can help prevent an unwelcome surprise at the closing table.
See FHA Draft policy here.
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Strong housing policy begins with clear data, thoughtful collaboration, and a shared commitment to expanding opportunity for every community.
—Neeley Erickson
Neeley Erickson is a Government Affairs Director specializing in housing policy, local governance, and community development across Illinois. Her work focuses on advancing practical solutions that expand housing opportunity and strengthen communities.