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What Is A Mortgage Reduction Program?

It is when a lender agrees to reduce the principal balance you owe on your mortgage.

Why Would You Want This Option?

If your home has decreased in value to the point where it is worth less than you owe. The reduction on your principal would bring your payments down and inline with the current value of your home.

This is a loan modification program that President Obama created in an attempt to help the U.S. economy by assisting homeowners with their mortgages. The theory being , if homeowners could be helped financially to avoid more foreclosures this of course would have a trickle down effect on the economy.

Putting more money back in homeowners pockets would allow them to make their monthly mortgage payments. Plus with more disposable income available, they would spend more money therefore giving the economy a much needed boost.

In addition to offering loan modifications, this program also requires lenders to evaluate homeowners on a case by case basis to see if they qualify for the PRA program.

Sounds Great Right?

Well, the problem is while lenders are required to automatically assess whether or not a homeowner is eligible for PRA, there is no incentive to do so. Currently, the U.S. government subsidizes every approved loan modification. This means if a lender approves your loan modification, the lender will get $4,000 for doing so.

But with the mortgage reduction program there are no financial incentives. So the number of PRA approvals are very low. That's not to say it's impossible to be approved. It just means it will require a lot of "fight" on your part.

Benefits

The benefits are obvious. More money in your pocket and you could save your home from foreclosure.

What Are The Requirements?

You must be"underwater" on your mortgage meaning you owe more than your home is worth
Fannie Mae or Freddie Mac cannot own or guarantee your mortgage.
Must prove financial hardship
Must actually live in the home you want a loan modification for.
Must have gotten your mortgage on or before January 1, 2009.
You must be able to provide proof that your income will allow you to make the modified payments.
Your mortgage payment is more than 31 percent of your gross (pre-tax) monthly income.
You owe up to $729,750 on your 1st mortgage.
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If All Of This Seems A Little Complicated...

That's because it is. Applying for a loan modification is like taking on a second job. The time and documentation gathering is more than a notion. On the other hand, you've got to do whatever is necessary to save your home. If you're not familiar with how loan modifications work you'll need to spend time researching and familiarizing yourself with specific terms.

You will need a good understanding of the process when it comes time to negotiate with your lender.

Especially if you're hoping to take advantage of the mortgage reduction program. If you're not feeling completely confident. Look into the services of a reputable experienced loan modification service. They can save you valuable time and possibly your home.