Study flags $880M in subordinate liens on 2023 vintage FHA mortgages

More than 82,000 Federal Housing Administration (FHA)-backed mortgages originated in 2023 – about 17% of the total – carry at least one small subordinate lien, layering roughly $880 million of additional obligations on borrowers who already entered homeownership with thinner financial cushions, according to a new Benutech analysis.

Benutech attributes most of the liens to pandemic-era FHA loss-mitigation tools, particularly COVID-19 Recovery Standalone Partial Claims, along with some down payment assistance programs.

The company says the data does not show a “crisis in the traditional sense,” because there is no “single dramatic spike, no geographic collapse.” But it signals a “quiet architecture of layered debt being constructed, brick by brick, on top of the nation’s most leveraged mortgage product.”

The findings, drawn from Benutech’s national property records file for all 50 states, examine second-, third- and fourth-position liens of $20,000 or less attached to active FHA loans originated in 2023.

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.”

FHA waterfall factors

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. That cap was initially 25% for COVID-era claims and was later raised to the full 30% as the pandemic continued.

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, in part due to concerns that multiple subordinate liens could effectively exhaust a borrower’s equity and increase the risk of being underwater in a downturn. 

FHA’s Permanent Loss Mitigation Waterfall, in effect since October 2025, limits borrowers to one major loss-mitigation action every 24 months to curb repeated lien stacking.

The FHA’s December 2025 Mutual Mortgage Insurance report showed that 41% of new partial claims were given to borrowers who had already received three or more partial claims. 

Matt Jones, deputy assistant secretary for the FHA’s Office of Single-Family Housing, said this week at a mortgage conference in New York that 36,000 borrowers have been in and out of serious delinquency, which exacerbates housing supply problems and servicing costs,.

October’s policy change, according to Jones, saves taxpayers $2 billion by driving a change in borrower behavior.  

Benutech frames the new data as part of a broader picture of housing stress. In earlier reporting, the firm tracked 808,000 foreclosure filings in 2025 and nearly 285,000 homeowners association (HOA) liens filed at a pace of one every 90 seconds.

“The foreclosure data tells you where fires are already burning. The HOA lien data tells you where accelerants are accumulating. The subordinate lien data tells you the homes most likely to have structural vulnerabilities when the fire arrives,” Fox said. “These three datasets, read together, are more than the sum of their parts.”

Flávia Furlan Nunes reported and wrote this article with drafting assistance from HousingWire Automation, an editorial tool that helps transform announcements and industry data into HousingWire-style news coverage.