What is the Principal Reduction Alternative?

When so many people are crippled by debt as is the case in today’s economy, any kind of break from all the bills is a widely welcomed boon. If you can pay your bills on time, your creditors can pay their bills on time and everyone up the chain is happy.If you’ve gone through all the channels and reduced your interest in every way imaginable, there are still ways to cut down on the amount you owe every month. The Principal Reduction Alternative, or PRA, protects lenders while allowing borrowers to get out from under bad loans.

Let’s face it; lots of homes today are worth less than they were five, ten or even fifteen years ago. Plummeting property values mean people are stuck with their high priced mortgages when their homes are worth less and all the goods around them, from food to gasoline, cost more.

This means people literally have less money to pay the exorbitant rates for their properties which are losing value even as they hand over the meaty payments every month. It’s a kind of maddening situation, really.

By reducing the principal, or the amount borrowed, the government effectively reduces the mortgage payments for a homeowner because the mortgage is now for a lesser amount of money.

This helps the lenders, because they come closer to making the black on money borrowed to you and it helps you because you owe less money on your house which is worth less; not exactly an unfair arrangement considering how the government bailed out so many large corporations only a few years ago. Programs like the PRA are kind of like our bailout.

How do you qualify for a Principle Reduction?
Qualifying for this program means meeting many of the same criteria needed to net entry to the Home Affordable Modification Program (HAMP) and other, similar programs. One noteworthy exception is that your building absolutely cannot be guaranteed by Freddie Mac or Fannie Mae, two notoriously bad banks.

Those two lenders were so bad, the government came up with very specific programs to deal exclusively with their loans. If you’re underwritten by one of those two you’re not out of luck but you need to apply for some other assistance.

Requirements are admittedly more flexible than those for the Home Affordable Refinance Program (HARP). The remaining mortgage must be worth more than the home’s actual value as well, which means only the people who got hit the hardest by this economic crisis are going to get this assistance.

In addition, the person applying for PRA assistance must also be living in the property in question. While the government is interested in keeping families living indoors, they won’t help much with empty homes which normally lack tenants.

No fraudsters or felons need apply; they’ll all be denied for these programs up front. There are more than a handful of lending agencies taking part in these programs right now and the number, currently more than 100, is growing at a steady pace.

There are plenty of hurdles and hoops which will arise during the PRA process so you’ll probably want a home loan modification attorney to guide you through it. All the big banks and government agencies have trained, skilled legal representation on their sides – shouldn’t you?

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Comments ( 8 )

[…] state, you need to get all the right information together. This is easy; since you’ve applied for other relief programs as a rule before applying to this one, you should already have all pertinent papers on […]

2MP or Second Lien Modification Program | Mortgage Modification added these pithy words on Feb 03 15 at 7:47 am

I have heard that some lenders will reduce the principal on the mortgage. My loan is with Chase and I have been trying to get a loan modification that offers a principal reduction for a long time. Chase has kept me in the review process forever!! If I hire an attorney will that increase my chances of getting a principal reduction from Chase?

Barbara Johnson added these pithy words on Dec 15 14 at 11:58 pm

Absolutely!! Preferred Law & Attorney Loan Modifications have worked with Chase on numerous files. Chase is a very great lender to work with. We have direct contacts at there loan modification work out department. Chase will, in some cases, offer a principal reduction to our clients. This can depend on how much equity has been lost in the home or if the home is in a hard hit are like Illinois, Michigan, Ohio, Florida or California.

Attorney Load Mod added these pithy words on Dec 16 14 at 12:08 am

If I am current on my mortgage can I get a principle reduction on my mortgage. I am not in foreclosure but have applied for a loan modification at Bank of America in Illinois. My Bank of America branch in Illinois has said that I don’t qualify for a loan modification or a principal reduction.

Sandra added these pithy words on Dec 16 14 at 3:51 am

Interested in help seeking a Principal Reduction on mortgage from Wells Fargo. Already paid for re-fi in 2009- not doing that again. Denied loan modification some time back – very disappointed. Denied request for re-calculation.

What do you charge?

Thank you.


Joy Vermillion added these pithy words on Jan 13 15 at 7:42 pm

Hi Joy;

Wells Fargo is always a very difficult bank to negotiate your mortgage with. Our team has spent years developing the contacts that we have at Wells. Right now rates are so low that being offered a 2% interest rate is almost a foregone conclusion. Wells Fargo, Chase, Bank of America etc.. are required to offer these new terms to you; but they don’t want you to know that. I would strongly encourage you to speak with one of our advisors, at no charge, and they can let you know what type of mortgage payment relief you are entitled to. You can call 888-980-7566.

Attorney Load Mod added these pithy words on Jan 14 15 at 8:06 am

I am presently in chapter 13 My bank claimed 84,000 secured, the court said debt is 54,000 to be paid in 60 payments after discharge will I own property

chuck added these pithy words on Jan 15 15 at 7:12 am

Usually the 60 payments that you are making to the bankruptcy trustee only include the arrears (the total amount that you are behind on the mortgage). You are also required to make your regular mortgage payment as well. In your case you have gone through what is called lien stripping (just not forgiving the mortgage entirely). Because you have new court ordered balance on your mortgage it is possible that you have to make your mortgage payments through your payment plan with the trustee. The concern I have is that even if your new mortgage payment is at 0% interest you would be paying over 4,000 every month to repay 54,000 over 5 years. A Chapter 13 repayment plan will also have fees to the trustee and USUALLY fees to your attorney. So if your 60 month chapter 13 payment plan is not well over 4,000 then you really need to seek additional advice. One of our advisors can discuss your situation. Please call 888-980-7566.

Attorney Load Mod added these pithy words on Jan 15 15 at 8:57 am

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