The Federal Housing Administration (FHA) proposed updates to its partial claim option that provides an avenue for borrowers to bring their loans current and avoid foreclosure. The agency published a mortgagee letter (ML) about the changes on its drafting table for industry participants to review.

“Due to the increased use of partial claims in recent years, HUD is updating two procedural requirements where this tool is used to assist borrowers,” the ML stated.

Specifically, the proposed changes establish a new procedure requiring mortgagees to obtain partial claim payoff statements from HUD’s SMART Integrated Portal (SIP) and provide it when they receive a payoff request on an existing FHA-insured mortgage. The time allowed for mortgagees to record partial claim security interests was also extended from five days to 15 days.

If finalized, the updates may be implemented immediately, but no later than 90 days from its publication in the Federal Register. Interested stakeholders have under Oct. 10 to review the letter and submit their feedback.