Principal Reduction Alternative (PRA)

Housing Vouchers * Public Housing * Homeless * Making Home Affordable

Reduce Your Mortgage Loan with Principal Reduction Alternative (PRA)

What is the Principal Reduction Alternative (PRA) Program?

Enacted: October 2010 – effective for mortgages originated on or prior to January 1, 2009

Making Home Affordable initiative ended on December 31, 2016

Explore 50 States Public Financial Assistance Guide

Principal Reduction Alternative (PRA) offers help to homeowners whose homes worth significantly less than their mortgage loan balance. It offers help to troubled homeowners by reducing their mortgage loans.

Mortgage service companies participating in the Home Affordable Modification Program (HAMP) are required to evaluate borrowers who are being considered for HAMP and owe more than 115% of their home value. When mortgage servicers include principal reductions in their mortgage modifications under the PRA program, the principal reduction amount is initially treated as a non-interest-bearing principal balance. If the homeowner participating in the PRA program is in good standing on the first, second, and third anniversaries of the effective date of the mortgage loan modification, one-third of the offered principal reduction amount is forgiven on each anniversary.

Purpose of Principal Reduction Alternative Program

Homeownership preservation and home values protection by offering incentives to participating mortgage lenders to use targeted principal reduction in their loan modification programs.

Goal of PRA

To help underwater homeowners that owe more than 115 percent of their home’s value by reducing their principal mortgage loan.

Who may be eligible?

All homeowners in financial hardship who:

  • Owe significantly more than their home is worth
  • Have mortgage loans originated on or before January 1, 2009
  • Owe up to $729,750 on their first mortgage
  • Have a monthly mortgage payment over 31% of their gross monthly household income
  • Are delinquent or in danger of falling behind on their mortgage payments
  • Have sufficient and documented income to support a new modified payment
Contact your mortgage company for details to see if you are eligible.

How to apply?

Contact your mortgage company servicer – the company to which you make your monthly mortgage payments and ask them for Initial Application Package for Home Affordable Modification Program and ask them to evaluate you for the Principal Reduction Alternative as well.

There are hundreds of mortgage companies currently participating in the Principal Reduction Alternative Program including Wells Fargo, Bank of America, JP Morgan Chase and CitiMortgage.

The best way to proceed is to call a HUD-approved housing counselor and ask about Principal Reduction Alternative Program at 888-995-4673  (Hearing impaired: 877-304-9709 TTY) to help you understand your options, prepare your application, and work with your mortgage company.

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