38 USC 3737 - Partial Claim Program

U.S Code last checked for updates: Jan 09, 2026

§ 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 amount of indebtedness under the guaranteed loan that the Secretary does not purchase.

(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 180 days following such a major disaster.

(3)

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

(A)

shall not alter the guaranty calculation specified by section 3703 of this title;

(B)

shall be included, for the purpose of a liquidation sale, in the same manner as any other advance allowed by the Secretary; and

(C)

shall not be claimed under the guaranty or increase the Secretary’s cost of acquisition of the property securing the defaulted loan.

(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 and servicing the loan.

(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, a borrower who defaults on a partial claim shall be liable to the Secretary for any loss suffered by the Secretary with respect to such default, and such loss may be recovered in the same manner as any other debt due the United States. The Secretary shall not restore housing loan entitlement under section 3702(b) of this title until such loss is repaid in full.

(B)

The Secretary may charge administrative costs, fees, and interest, as appropriate, with respect to any default under a partial claim in a manner similar to the interest and administrative costs charged under section 5315 of this title.

(2)

Notwithstanding section 2410 of title 28, a non-judicial sale of real property to satisfy a loan guaranteed under this chapter shall discharge the property from a partial claim interest held by the Secretary, provided that the holder of the guaranteed loan conducts the non-judicial sale and distributes the sale proceeds, if any, in accordance with the State or local law where such property is situated.

(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 in Advance of Regulations.—

Notwithstanding any other provision of law, the Secretary may, before prescribing regulations, issue administrative guidance with respect to the Partial Claim Program under this section and the loss mitigation options prescribed under section 3732(d) of this title, including any additional terms, conditions, and requirements the Secretary determines necessary.

(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; amended Pub. L. 119–37, div. G, title III, § 7307(b)—(e), Nov. 12, 2025, 139 Stat. 651, 652.)

cite as: 38 USC 3737