FHA Seeks Feedback on Proposed Reinstatement Advance Payment Demonstration for Partial Claims

The Federal Housing Administration is seeking feedback on a proposed Reinstatement Advance Payment Demonstration for Partial Claims.

On Monday FHA posted draft Mortgage Letter Reinstatement Advance Payment on its Single-Family Housing Drafting Table for stakeholder review and feedback.

If it is finalized, this Mortgage Letter would establish policy to help implement a Reinstatement Advance Payment (RAP) Demonstration for Partial Claims. The RAP demonstration would provide an alternative method of securing the partial claim or payment supplement debt through a RAP Repayment Agreement secured under the FHA-insured first mortgage. This would eliminate the need for a partial claim note and subordinate mortgage.

FHA noted participation in the RAP Demonstration would be voluntary, and all mortgagees would be eligible to participate. Mortgagees would be permitted to decide when to utilize a RAP on a case-by-case basis. Under the RAP Demonstration, mortgagees would retain the RAP Repayment Agreement and remain responsible for servicing the partial claim or payment supplement and collecting the amount due from the borrower.

FHA said the RAP is intended to reduce the burden on servicers in obtaining and recording notes and subordinate mortgages, as well as to align with standard industry practice. “Additionally, it would help facilitate the sale, refinance, assumption, and transfer processes since there will no longer be a subordinate lien to resolve. Finally, because the RAP does not create a subordinate federal lien, this would also remove challenges associated with nonjudicial foreclosures of mortgages,” the agency said in a press release.

Stakeholders may provide feedback through September 3, 2026 using the feedback instructions posted on the Drafting Table.