The Principal Reduction Alternative (PRA) was a federal program introduced as part of the broader Making Home Affordable initiative. It was designed to help struggling homeowners reduce the balance on their mortgage loans when their home was worth less than what they owed. The program encouraged mortgage servicers to lower the principal amount, creating more affordable monthly payments for qualified borrowers.
Though the PRA program officially ended in 2016, understanding how it worked remains important—especially for those researching past housing relief efforts or exploring other options still available today.
Principal reduction refers to the process of lowering the amount a borrower owes on a mortgage loan. The PRA program targeted underwater borrowers—homeowners whose unpaid principal balance exceeded the current market value of their homes. By reducing this balance, the goal was to improve affordability, prevent foreclosure, and give borrowers a chance to regain financial stability.
For many participants, PRA offered a long-awaited solution to crushing mortgage debt, especially in the aftermath of the 2008 housing crisis.
The Principal Reduction Alternative was part of the broader Home Affordable Modification Program (HAMP). While HAMP aimed to reduce interest rates or extend loan terms, PRA specifically focused on reducing principal balances. Mortgage servicers who participated in PRA would first evaluate whether a loan met eligibility requirements and then decide how much of the balance could be forgiven over time—typically in annual increments, provided the borrower remained current on payments.
Even though HAMP and PRA are no longer active, their legacy continues to shape how lenders and federal programs assist borrowers facing financial hardship.
To qualify for the Principal Reduction Alternative before it expired, borrowers had to meet several strict requirements. These included:
Meeting these qualifications made a borrower eligible to apply, but acceptance into the program was not automatic. Servicers reviewed applications on a case-by-case basis.
When PRA was available, applying involved a few key steps. Homeowners would begin by contacting their mortgage loan servicer—the company that managed their monthly payments. The servicer would review the borrower’s situation, including their income, home value, and payment history, to determine if a loan modification under PRA was possible.
Another valuable step was connecting with a HUD-approved housing counselor. These counselors helped homeowners understand their options, gather necessary documents, and communicate with lenders more effectively.
Though PRA is no longer open for applications, this process remains a good model for how to approach other loan modification programs that may still be available.
Housing counselors played a vital role in the success of PRA and similar programs. They helped borrowers through every step, including:
Even now, working with a certified counselor remains one of the best ways for homeowners in financial trouble to learn about current programs. Free, trustworthy help is available through organizations listed in the HUD Housing Counseling Directory.
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For many homeowners, PRA provided a crucial alternative to foreclosure. The program was aimed at people facing the possibility of losing their homes because their mortgage payments had become unaffordable. By lowering the principal balance, PRA could reduce monthly payments enough to avoid foreclosure altogether.
Although the program has ended, understanding how it worked can help borrowers explore similar foreclosure prevention options, such as forbearance agreements, repayment plans, or refinancing solutions available through current federal or state programs.
For a breakdown of today’s foreclosure avoidance tools, Credit.org offers a guide to the foreclosure process.
One important limitation of PRA was that it did not apply to loans owned or backed by Freddie Mac or Fannie Mae. These two government-sponsored enterprises support a large share of the mortgage market, but loans under their umbrella were excluded from the PRA program.
Homeowners were encouraged to check the status of their loan using official lookup tools like the Freddie Mac Loan Look-Up or the Fannie Mae Loan Lookup Tool. If their loan was not backed by either, they could explore PRA or other principal reduction programs their servicer may have offered.
As part of the PRA structure, the forgiven principal was often subject to a trial period. Borrowers were required to make on-time payments for several years before the reduction was finalized. This model helped ensure long-term financial responsibility while still providing much-needed relief.
In some cases, servicers offered PRA forbearance options—temporary pauses or reductions in monthly payments—to give borrowers time to recover from hardship. These tools, though not permanent fixes, could help stabilize finances and prevent foreclosure.
Since PRA expired in 2016, homeowners looking for help with an unaffordable mortgage loan have had to rely on other programs. Some loan servicers now offer their own principal reduction modification options, while others continue to follow best practices shaped by PRA’s success.
While the Home Affordable Modification Program and PRA are no longer active, the lessons learned from these initiatives have influenced more recent efforts like:
Borrowers who need help today can reach out to their servicers directly or connect with a certified housing counselor to explore what’s currently available.
If you’re facing financial hardship, the best first step is to seek help from trusted, official resources. Start with a nonprofit housing counseling agency like Credit.org’s HUD-certified counseling services, where expert counselors can help assess your situation and create a plan.
For additional support and the latest information, consider these trusted sources:
These pages are actively updated and provide guidance on loan modifications, mortgage forbearance, and how to qualify for other support programs if you’re struggling with payments.
The Principal Reduction Alternative helped thousands of homeowners avoid foreclosure during a time of national crisis. Though it’s no longer available, its structure and outcomes laid the groundwork for modern government and lender-driven solutions.
If you’re dealing with high housing costs or are worried about falling behind, help is available. For free, on demand, HUD-approved housing counseling, call credit.org today. Wherever you are in the homebuying or foreclosure process, a certified counselor can help you know your rights, avoid scams, and find mortgage relief.
