Earlier this month the Treasury department introduced an
amendment to the HAMP program. The Principal Reduction Alternative (PRA) which
offers mortgage relief to borrowers who qualify due to their homes being worth significantly
less than the balance owed on their first lien mortgage loan.The guidelines apply to all GSE loans that
are eligible for the HAMP program only.
With this new amendment, mortgage servicers are required to
evaluate all HAMP qualified loans with a market-to-market loan-to-value greater
than 115% and make a determination if principal reduction would be beneficial.
This guideline will go into effect on all loan modifications that are active on
or after 10/1/2010.
PRA will be earned over a 3 year period. Every year for 3
years after the modification that the borrower is in good standing one third of
the original PRA forbearance amount will be removed from the deferred principal
balance. For example if you PRA is $30,000.00 and you make 1 year of on time
payments on your modified loan they will reduce that deferred PRA by
$10,000.00.
