Federal Mortgage Principal Reduction Alternative Program Sees Increases In Aid Offered To Underwater Homeowners

Here in the early parts of October we have seen information from the federal Making Home Affordable Program on certain programs tracked through the month of August, like the Principle Reduction Alternative, which may be beneficial for homeowners who are seeking help when it comes to addressing issues where the value of homeowner’s property has dropped below what they owe. While this has been more common in some areas, homeowners are still seeking opportunities to alleviate themselves of some of their principal simple because opportunities for refinancing for more affordable rates are not always an option, and homeowners are looking for ways that may allow them to get out of debt faster and at less overall cost despite being a negative equity position.

While this Principle Reduction Alternative plan is not always available for everyone, there have been some improvements between July and August, according to the Treasury Department, as in the number of total Principal Production Alternative trial modifications that had been started in July stood at 29,406, but this number increased to 35,001 in the month of August. Essentially, these modifications are part of the federal Home Affordable Modification Program, where a homeowner can get a modified payment on their primary lien, but some may go so far as to help homeowners by reducing their mortgage principal by a certain percentage as well.

As of August 2011, the number of permanent modifications that are active and have this PRA option in place stand at 10,544, which was an increase from 9,221 in July. Again, this program has not always been helpful for some homeowners, but others have seen average principal reductions of around $67,000, and this can be substantially helpful for homeowners who have seen their property value plummet over the past months or years. Obviously, there are officials who feel that some properties may still see loss in terms of their value, throughout the end of 2011, but it’s hoped that these drops in home prices will find their bottom so that we can begin to implement strategies or move forward in such a way that will allow these empty homes to be filled and, hopefully, property values improve.

There are some predictions that home prices may not return to a traditional level until around 2020, which for some homeowners has been terrible news since they have lost a great deal of value on their home but still may owe a substantial amount on their mortgages well. However, in these cases homeowners may be able to benefit from opportunities like the Principal Reduction Alternative initiative as part of a modification, since this can work in tandem with a federal modification to not only help homeowners when it comes to monthly payments on their mortgage but it may also work in the interest of a homeowner in the long run as they will have less mortgage debt to pay as a result.