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.
Homeownership preservation and home values protection by offering incentives to participating mortgage lenders to use targeted principal reduction in their loan modification programs. Begin a free mortgage counseling session with one of our qualified housing counselors. Get Started Now. Need Mortgage Help? Billions of State and Federal Mortgage Assistance Funding is still available to struggling homeowners. Get Help Now. Internal Revenue Service. Department of the Treasury.
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Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Your Money. Personal Finance. Your Practice. Popular Courses. Home Ownership Mortgage. Since the last quarter of , if a mortgage loan is being considered for a HAMP modification and if the ratio of the amount owed to the value of the home is greater than percent, then the servicer must consider whether a Principal Reduction Alternative SM PRA principal reduction should be effected as one part of the HAMP modification.
If the homeowner then achieves a payment history that is sufficiently timely over a three-year period, the entire PRA Forbearance Amount is eventually reduced to zero. In connection with every HAMP modification of a loan that is not owned or guaranteed by Fannie Mae or Freddie Mac, to encourage participation in HAMP, the government provides incentives to the investor that is, the holder of the loan , to the homeowner, and to the servicer.
If a HAMP modification of such a mortgage loan includes a PRA principal reduction, the government makes additional incentive payments over three years to the investor.
For information on tax issues related to the Principal Reduction Alternative, see the questions and answers below. A1: The PRA investor incentive payment to the holder is treated as a payment on the loan by the government on behalf of the homeowner.
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