38 USC 3737 - Partial Claim Program

U.S Code last checked for updates: Aug 17, 2025

§ 3737.

Partial Claim Program

(a)

Establishment.—

The Secretary shall carry out a program, to be known as the “Partial Claim Program”, under which the Secretary may make a partial claim, described in subsection (b), with respect to a loan—

(1)

guaranteed under this chapter;

(2)

regarding the primary residence of the borrower; and

(3)

that the Secretary determines is in default or at imminent risk of default.

(b)

Partial Claim Described.—

A partial claim described in this subsection, with respect to a loan described in subsection (a), is the purchase by the Secretary of a portion of indebtedness under the loan, through a transaction under which the Secretary—

(1)

pays to the holder of the loan the amount of indebtedness, subject to subsection (c), that the Secretary determines necessary to help prevent or resolve a default; and

(2)

receives a secured interest in the property that serves as collateral for the guaranteed loan, which is subordinate to the first lien guaranteed loan for such property.

(c)

Administration of Partial Claim.—

(1)

(A)

Subject to subparagraph (B), the amount of a partial claim under this section with respect to a loan guaranteed described in subsection (a) may not exceed 25 percent of the unpaid principal balance of the loan on the date on which the partial claim is made.

(B)

In the case of an individual who failed to make a payment on a loan guaranteed under this chapter during the period beginning on March 1, 2020 and ending on May 1, 2025, the amount of a partial claim under this section may not exceed 30 percent of the unpaid principal balance of the guaranteed loan as of the date that the initial partial claim is made.

(2)

(A)

Subject to subparagraph (B), the Secretary may make only one partial claim per loan.

(B)

The Secretary may make an additional partial claim on a loan guaranteed under this chapter in the case of an individual who failed to make a payment on such loan during—

(i)

a major disaster declared by the President under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5170); or

(ii)

the period of 120 days following such a major disaster.

(3)

An amount paid to the holder of a loan as a partial claim—

(A)

shall not count against the amount of a loan that may otherwise be guaranteed under this chapter; and

(B)

may not be applied to the portion of the loan that is guaranteed under this chapter.

(4)

A holder of a loan guaranteed under such chapter for which the Secretary makes a partial claim under this section shall apply the amount paid by the Secretary for the partial claim first to arrearages, if any, on the guaranteed loan. Such arrearages may include any additional costs (such as taxes, insurance premiums, or homeowner’s dues) the Secretary determines necessary to prevent or resolve a default.

(5)

The Secretary may enter into a contract with an appropriate entity for the service of a partial claim made by the Secretary under this section. Any such contract shall provide that such entity shall provide quarterly statements to the holder of the loan for which the Secretary makes the partial claim.

(d)

Requirements of Loan Holder.—

(1)

The Secretary may require the holder of a loan for which the Secretary makes a partial claim under this section to take any actions necessary to establish the partial claim, including preparing, executing, transmitting, receiving, and recording loan documents.

(2)

The Secretary shall compensate the holder of such a loan appropriately, as determined by the Secretary, for the services required of such holder under this subsection.

(3)

The Secretary may exercise the authority of the Secretary under this subsection without regard to any other provision of law not enacted expressly in limitation of this section that would otherwise govern the expenditure of public funds.

(e)

Default and Foreclosure.—

(1)

(A)

Notwithstanding section 3703(e) of this title, an individual who defaults on a loan for which the Secretary makes a partial claim made under this section shall be liable to the Secretary for any loss suffered by the Secretary resulting from such default. Such a loss may be recovered in the same manner as any other debt due the United States.

(B)

In the event of default by an individual on a loan for which the Secretary makes a partial claim made under this section, the Secretary may reduce the aggregate amount of guaranty or insurance housing loan entitlement available to the individual under this chapter.

(2)

Notwithstanding section 2410(c) of title 28, an action to foreclose a lien held by the United States arising under a partial claim made under this section shall follow foreclosure procedures in accordance with State or local law where the property involved is located.

(f)

Decisions by the Secretary.—

(1)

Any partial claim made under this section shall be made in the sole discretion of the Secretary and on terms and conditions acceptable to the Secretary that are consistent with this section.

(2)

Any decision by the Secretary under this section is final and conclusive and is not subject to judicial review.

(3)

For purposes of section 511 of this title, any decision under this section shall not be treated as a decision under a law that affects the provision of benefits.

(g)

Compliance.—

(1)

The Secretary may establish standards for processing payments under this section based on a certification by a holder of a loan guaranteed under such chapter that the holder has complied with all applicable requirements established by the Secretary.

(2)

The Secretary shall carry out, on a random-sampling basis, post-payment audits to ensure compliance with all requirements under paragraph (1).

(h)

Guidance With Respect to Certain Loans.—

(1)

With respect to a loan described in paragraph (2), the Secretary may—

(A)

before prescribing regulations, issue administrative guidance regarding the making of a partial claim relating to such loan; and

(B)

establish, through such guidance, additional requirements applicable to such a partial claim.

(2)

A loan described in this paragraph is a loan that the Secretary determines was in default on the date of the enactment of this section.

(i)

Rule of Construction.—

Nothing in this section shall be construed to limit the authority of the Secretary under subsections (a) and (d) of section 3732 of this title.

(j)

Termination.—

The Secretary may not make a partial claim under this section after the date that is five years after the date of the enactment of this section.

(Added Pub. L. 119–31, § 3(a), July 30, 2025, 139 Stat. 476.)

cite as: 38 USC 3737