Last week I was on a National Association of REALTORS® policy committee Zoom call from the passenger seat somewhere in Ontario. We hadn’t quite done the time math when we planned the trip to Niagara Falls — Sharon drove while I stayed on the call. The meeting included a presentation from Ryan Eaton, Senior Advisor at the Federal Housing Administration. I was asking questions of an FHA official from a moving car crossing into Canada. That’s committee work. The topic: an FHA partial claims problem that has been derailing transactions across the country, including here in Shawnee.
Here’s why that call matters to anyone buying or selling a home in Shawnee.
The Problem
If you’ve bought or sold a home in the under-$250,000 range in Shawnee, there’s a decent chance FHA financing was part of the picture. FHA loans — and USDA Rural Housing loans — are workhorses in this market. They make homeownership possible for buyers who don’t have a large down payment (or any down payment at all), and they keep transactions moving in price ranges where conventional financing can be harder to access.
So when something goes wrong inside the FHA system, it doesn’t just affect lenders. It affects real buyers, real sellers, and real closings. And the ripple effect on multiple sales is a real consequence.
For the past year or two, agents and lenders across the country have been running into the same maddening problem: FHA partial claims surfacing at the last minute and tanking deals that should have closed.
Here’s the short version of what a partial claim is: when a borrower goes through a hardship — say, a COVID forbearance — FHA can advance funds to bring their loan current. That advance becomes a separate, subordinate lien on the property. It’s essentially a second mortgage, interest-free, that sits behind the first.
The trouble is, these liens weren’t always easy to find until title work was done deep into the transaction. Buyers, sellers, and agents would get close to the closing table — sometimes at the closing table — and suddenly there’s an unexpected lien that has to be paid off or resolved before the sale can proceed. Deals fell through. Buyers lost homes. Sellers lost contracts.
What We Did About It
I serve on the NAR Federal Financing and Housing Policy Committee, a national committee that advises NAR on federal housing policy. It’s one of the ways I stay plugged into what’s happening at the federal level so I can better serve clients here at home.
This partial claim problem was showing up in committee members’ markets across the country. We documented what we were seeing, brought it to NAR’s policy staff, and they took it directly to FHA.
Last week that feedback loop became a direct conversation. Ryan Eaton, Senior Advisor at FHA, presented to our committee, and I was able to ask questions and hear his responses in real time. That kind of access is rare, and it’s exactly the point of serving on a committee like this.
Days later, Elayne Weiss, NAR’s Senior Policy Advisor for Federal Financing and Housing, sent the committee a note: FHA had already moved. The draft was posted.
What FHA Is Proposing
On July 20, FHA posted a draft Mortgagee Letter for public comment proposing a Reinstatement Advance Payment (RAP) Demonstration for partial claims.
The core idea: instead of creating a separate subordinate lien (the thing causing all the last-minute chaos at closing), the partial claim debt would be folded into a repayment agreement secured under the existing FHA-insured first mortgage. No separate note. No subordinate mortgage. No surprise lien showing up in title.
Lender participation would be voluntary and on a case-by-case basis. The proposal is still in draft form, and stakeholders have until September 3, 2026 to comment. But if finalized, it would meaningfully reduce the risk of late-breaking deal killers on FHA transactions.
Why It Matters Here
Shawnee’s entry-level and move-up markets run heavily on FHA and USDA financing. If you’re buying or selling a home in the $250,000 and below range locally, there’s a real chance this kind of policy affects your transaction.
Smoother FHA transactions mean fewer deals collapsing late in the process. That’s good for buyers who’ve already given notice at their apartment, and good for sellers who’ve already committed to their next home.
I’ll keep you posted as this moves forward. And if you have questions about how FHA or USDA financing works in today’s Shawnee market, I’m always happy to talk.