Benutech finds 82,000 FHA mortgages have subordinate liens

Second-, third-, and fourth-position liens of $20,000 or less were examined for active FHA loans originated in 2023 across all 50 states. Among 495,086 FHA loans reviewed, 73,237 properties, about 14.8%, had a second lien within the threshold. Of those properties, 7,762 had a third lien and 1,533 had a fourth lien. Average lien amounts were roughly $10,900 to $11,300. Third or fourth liens on FHA-originated homes indicate households entering ownership with existing financial burden. Much of the lien buildup is linked to the COVID-19 Recovery Standalone Partial Claim program, which converted past-due amounts into interest-free deferred-payment liens. A statutory cap limited total partial claims on a mortgage to 30% of unpaid principal balance, allowing multiple claims over time. The program ended in September 2025, and a Permanent Loss Mitigation Waterfall began in October 2025, limiting major loss-mitigation actions to once every 24 months.

"Out of 495,086 FHA loans reviewed, 73,237 properties (about 14.8%) had a second lien of $20,000 or less. Of those, 7,762 had a third lien and 1,533 had a fourth lien recorded. Individual liens averaged roughly $10,900 to $11,300."

"When you see a third or fourth lien on a property that entered homeownership through FHA, you're looking at a household that started the race already carrying weight, said Brian Fox, chief revenue officer at Benutech. The individual amounts seem small but they're often the difference between a homeowner who can weather a disruption and one who can't."

"The report links much of the lien buildup to FHA's COVID-19 Recovery Standalone Partial Claim program, which moved past-due amounts into an interest-free, deferred-payment lien instead of requiring immediate repayment. Under statute, total partial claims on a single FHA mortgage cannot exceed 30% of the unpaid principal balance (UPB) at the time of the first claim."

"Because the cap applied to aggregate dollars rather than the number of liens, borrowers could draw on remaining capacity multiple times. A borrower using 10% of UPB in a 2021 partial claim could return for additional standalone claims in 2023 or 2024, generating third or fourth liens so long as the total stayed under the 30% ceiling. Regulators ultimately ended the COVID-19 Standalone Partial Claim program in September 2025."

Read at www.housingwire.com