HUD Extends Deadline on Draft FHA Mortgage-Relief Change
The Federal Housing Administration has extended the public feedback deadline to September 18, 2026, on a draft proposal that could change how some mortgage-relief balances are documented for FHA borrowers.
HUD announced the extension August 25 for a proposed Reinstatement Advance Payment demonstration. Under the draft, participating FHA-approved mortgagees could use a repayment agreement secured through the FHA-insured first mortgage instead of recording a separate partial-claim note and subordinate mortgage in certain loss-mitigation cases.
The proposal is not a final FHA program. HUD says it is not official departmental policy and cannot be used with any FHA-insured mortgage unless the agency publishes a final Mortgagee Letter.
What HUD is proposing
The draft would allow a participating mortgagee to advance delinquent principal, interest, approved arrearages and, where applicable, an approved principal reduction. The borrower would sign a Reinstatement Advance Payment, or RAP, Repayment Agreement covering the amount owed.
The RAP balance would be non-interest-bearing and secured through the FHA-insured first mortgage. In participating cases, that structure would replace the separate partial-claim note and subordinate mortgage generally used under current FHA practice.
The proposed demonstration would apply to FHA-insured Title II Single Family forward mortgage programs. The draft says RAP could be used with a standalone partial claim, a partial claim combined with a loan modification or a payment supplement.
Participation would be voluntary for mortgagees. Even a participating mortgagee would not have to use RAP for every eligible partial claim or payment supplement.
Borrowers would still owe the balance
The proposal would not forgive the deferred amount or eliminate the borrower’s repayment obligation. Under the draft, repayment generally could be triggered by the mortgage’s maturity, the sale or transfer of the property, a refinance, early payoff of the fully amortizing mortgage balance or termination of FHA insurance, subject to exceptions in the draft.
HUD’s current borrower guidance says a standalone partial claim is an interest-free subordinate lien and generally becomes due when the last mortgage payment is made, the property is sold, the mortgage is assumed, title is transferred or certain types of refinancing occur. RAP would change the documentation and servicing structure, not the basic obligation to repay the deferred amount.
Borrowers with existing FHA loss-mitigation arrangements should continue following their servicer’s current instructions. The draft does not change any FHA loan today and is not a borrower option while it remains under review.
Why the recording change matters
HUD says the proposed structure could reduce the work involved in obtaining and recording subordinate documents and could make sales, refinances, assumptions and transfers easier because there would be no separate subordinate lien to resolve.
The National Association of Realtors, in comments submitted September 1 and described in a September 2 report, said partial-claim liens can surface during title searches shortly before closing. NAR said requests for payoff information and lien releases can delay settlements and affect sellers’ expected proceeds. Those are the trade group’s reported concerns, not a quantified HUD estimate of national effects.
NAR also urged FHA to make outstanding RAP balances clearly visible on periodic mortgage statements and to consider borrower affordability when setting repayment terms. The group noted that a lump-sum balance due at mortgage maturity could create payment shock for some borrowers.
What happens next
Stakeholder comments are due September 18, 2026. FHA says it will review the feedback before publishing a final Mortgagee Letter. The draft currently contains placeholder language for its effective date and related Federal Register notice, and HUD has not announced when any final demonstration would begin.
Until then, the current FHA loss-mitigation rules remain in place. Homeowners facing hardship should contact their mortgage servicer promptly or seek help from a HUD-approved housing counseling agency rather than rely on the proposed RAP structure.
Sources
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