Homeowners In Federal Home Loan Modification Programs May Find Principal Reduction Options On Mortgage

Some homeowners who have negative equity in their mortgage have attempted to find principal reduction opportunities through their mortgage servicer 10 various mortgage assistance programs. While there are many financial institutions which may be hesitant to offer principal reductions for certain homeowners, there are some programs from the Making Home Affordable initiative which reportedly offer a reduction on a homeowner’s principal overtime.

One example of this comes from the Second Lien Modification Program. According to guidelines set in place by HAMP, homeowners who are accepted for their primary and secondary modification and make timely payments can receive a principal reduction for up to $1,250, which equates to $250 per year.

Also, homeowners who successfully complete a trial modification and receive a permanent home loan modification from the Making Home Affordable Program may also qualify for a principal reduction if timely payments are made. Again, guidelines from the federal modification program state that homeowners in this case may receive up to $5000, or $1000 per year for five years, if they make their modification payments on time.

There was also the introduction of a Principle Reduction Alternative program within the Making Home Affordable initiative which was hoped to provide additional sources of relief for homeowners facing an underwater mortgage situation. However, this program is at the discretion of a homeowner’s mortgage servicer, which again, may present a situation where a homeowner cannot benefit from this particular plan as there are institutions who feel principal reductions are not helpful in terms of providing stability for mortgage payments.

While obtaining these types of mortgage modifications or assistance programs may not be easy, there are some homeowners who may benefit from opportunities for principal reductions. However, the process of attaining a permanent modification from the Making Home Affordable Program has been deemed by some to be quite difficult, yet homeowners who work closely with their servicer and, for some who have consulted FHA-approved housing counselors or sought assistance from the HOPE Hotline, the difficulty of the process has been lessened.

Again, not all homeowners are guaranteed mortgage assistance through modifications or principal reductions, but these options are in place for those who qualify and may be helpful for any homeowners who are facing financial difficulty or the possibility of defaulting on their mortgage.