Principal Reduction Alternative: What You Need to Know

Principal Reduction Alternative: What You Need to Know

The Principal Reduction Alternative (PRA) is a federal program designed to reduce your mortgage principal if you owe more on your mortgage than your home is worth. This program encourages mortgage lenders to lower the amount you owe, providing relief for homeowners facing financial hardship. Over 100 loan service participates currently in this program, offering opportunities for qualified homeowners to achieve greater financial stability.

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Program Qualifications

To qualify for the Principal Reduction Alternative, you must meet the following eligibility requirements:

1. Your loan is not owned by Fannie Mae or Freddie Mac. Check if your loan is backed by Fannie Mae or Freddie Mac through their respective loan lookup tools (Freddie Mac Loan Look-Up).
2. Your home is worth less than you owe.
3. The mortgage balance is under $729,750.
4. You live in the house as your primary residence.
5. You first obtained the mortgage before 2009.
6. Your monthly payment exceeds 31% of your gross income. Use a mortgage affordability calculator to see how your payments compare.
7. You have a financial hardship.
8. You can prove sufficient income to cover your new house payment.
9. You have not been convicted of certain financial crimes in the past 10 years.

Meeting these qualifications doesn’t guarantee approval, but it ensures you are eligible to apply.

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Program Qualifications

To qualify for the Principal Reduction Alternative, you must meet the following eligibility requirements:

• Your loan is not a Fannie Mae or Freddie Mac loan.
• Your home is worth less than you owe.
• You owe less than $729,750.00.
• You live in the house.
• You first got the mortgage before 2009.
• Your monthly payment is greater than 31% of your income.
• You have a financial hardship.
• You can prove you have enough income to make your new house payment.
• You have not been convicted of certain crimes.

Meeting these qualifications makes you eligible to apply but does not guarantee approval.

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How to Apply

To see if you qualify for PRA:

1. Contact Your Mortgage Servicer:
   Your servicer can confirm your eligibility and guide you through the application process.
2. Work With a Housing Counselor:
   Certified counselors at HUD-approved housing counseling agencies provide free guidance to help you understand your options. Find a local counselor using the HUD Counseling Directory.
3. Understand Your Options:
   PRA is part of the Making Home Affordable Program, which offers additional mortgage relief solutions.

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Why Work With a Housing Counselor?

Housing counselors offer invaluable assistance:

• Clarify Your Options: They explain federal programs like PRA and help you choose the right one.
• Assist With Documentation: Completing paperwork correctly is critical to avoid delays.
• Advocate on Your Behalf: Counselors communicate with your servicer to ensure your case is handled effectively.

HUD-approved counseling is free and confidential, schedule your appointment today. Learn more about the benefits of counseling on the HUD official site.

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Next Steps

If you’re struggling with your mortgage, here’s what you can do today:

1. Verify Your Loan Eligibility: Use the Fannie Mae and Freddie Mac lookup tools linked above.
2. Speak With a HUD-Approved Counselor: Speak with our Hud-certified counselors to get a personalized action plan.
3. Explore Additional Resources: Visit our financial resources or browse the Consumer Financial Protection Bureau’s Mortgage Help Guide.

Acting now ensures you’re taking the best steps toward financial stability.