what is a principal reduction program?

It is for those who are way underwater on their mortgage...basically trying to get your lender or servicer to reduce your principal balance owed to an amount more in line with today's value. You can read more on it here http://www.makinghomeaffordable.gov/programs/lower-payments/Pages/pra.aspx

The Making Home Affordable program was part of the first round of solutions to assist homeowners that are upside down. The program provides for a reduction in your existing principal balance that is funded with funds set aside by the US government. The reason it has not worked the way it was intended is that in order to get the funds, you lender must agree to match the reduction dollar per dollar. The banks typically have refused to do any reduction in principal balance. ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ www.LoansA2z.com 888-889-9950

These programs are a branch off from loan modifications.. Under loan mod's, the lender could extend the amount of time you take to pay off your loan, such as 40 years vs. the original 30, or they could lower your interest rate.. but they could also do a principal reduction, meaning reduced the amount you owe... or any combination of the 3.. BofA, as part of a settlement with the federal government for their reckless handling of struggling home owners, has initiated a principal reduction program where they are sending out 200,000 letters of current BofA mortgage holders offering a principal reduction.. My guess is that half of these people will think it's a scam and throw the letter away, but if you take 200,000 of the nearly 6,000,000 loans held by Bofa, that's less than 4%... so don't hold your breath.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

A program that the lender will forgive a portion of the principal balance.

Any program that reduces what you currently owe on the property.

A principle reduction program is when the lender forgives a portion of your principle balance.

The Principal Reduction Program ("PRP") is a federally-funded program that was designed with the intention to provide capital to homeowners that have suffered a hardship. It was developed by CalHFA MAC and will work to reduce the outstanding balances of those properties that qualify with negative equity. A loan modification with a rate reduction can help reduce these outstanding balances.

Your lender would reduce the principal amount of your loan you owe to them