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A draft FHA rule would let arrears skip the second lien
The Reinstatement Advance Payment demonstration would secure caught-up arrears under the existing first mortgage rather than a recorded subordinate one. Feedback closes on 3 September.
Behind many American first mortgages that came out of a hardship arrangement sits a second one the household has stopped thinking about. It carries no interest, generates no bill, and falls due at sale, refinance or payoff. The Federal Housing Administration has put out for comment a draft under which, for servicers that opt in, it would not be created at all.
Writing for the National Law Review, two attorneys at Bradley Arant Boult Cummings describe the draft mortgagee letter as setting up a five-year Reinstatement Advance Payment demonstration. Their 3 August note records that FHA posted the draft on 20 July 2026 and is taking feedback through 3 September. The acronym is RAP, already spoken for this year by the Department of Education’s unrelated Repayment Assistance Plan.
What a partial claim does today
The partial claim is the mechanism that clears missed payments without altering the loan’s terms. The servicer advances the arrears, HUD reimburses it, and the borrower signs a zero-interest promissory note secured by a subordinate mortgage. Mayer Brown’s account of the Payment Supplement mechanics states the repayment trigger without ornament: the note and subordinate mortgage are repaid when the first-lien mortgage is extinguished, whether at maturity, sale, refinance, payoff or otherwise.
That is why the second lien exists, and why it must be released before the property can be sold or the loan replaced.
What the draft would change
Under the demonstration, the advance would instead be secured by the existing first lien and evidenced by what the Bradley summary calls a zero-interest RAP Repayment Agreement. No subordinate lien would be recorded. Servicers could elect the route and would not be obliged to use it for every partial claim.
The borrower-facing consequence sits at the far end of the loan. Where the amount cannot be cleared when the mortgage matures, the summary says the servicer must offer a RAP Terms of Repayment plan at least 45 days beforehand, running to a maximum of 18 months for balances up to $5,000, 36 months from $5,000 to $15,000, and 48 months above that.
What it is not
It is a draft, in a comment window, describing a pilot. Nothing in an existing arrangement changes because of it, and the sums a household already owes on a recorded partial claim stay exactly where they are. The direction is the point: under either structure the arrears do not vanish, they wait somewhere else — the recurring feature of every hardship arrangement this desk has examined.
We are a publisher reading a draft, not an adviser, and none of this is financial advice. Anyone mid-arrangement should ask their servicer what secures their arrears and read that document rather than a summary — and borrow only from lenders licensed where you live, checking the licence at the register rather than taking it on trust.