The Home Affordable Modification Program (HAMP) was established a few years ago by the Departments of the Treasury and Housing and Urban Development to help homeowners who are underwater avoid foreclosure.

Since 2010, one of HAMP's programs has been the Principal Reduction Alternative (HAMP-PRA). Borrowers who qualify for the program have their mortgage principal reduced by a predetermined amount (called the PRA forbearance amount).

A borrower qualifies for the HAMP-PRA program only if:

• • the mortgage is not owned or guaranteed by Fannie Mae or Freddie Mac

  • the borrower owes more than the home is worth

  • the house is the borrower's primary residence

  • the borrower obtained the mortgage before January 1, 2009

  • the borrower's mortgage payment is more than 31 percent of gross (pre-tax) monthly income.

  • up to $729,750 is owed on the 1st mortgage.

  • the borrower has a financial hardship and is either delinquent or in danger of falling behind

  • the borrower has sufficient, documented income to support the modified payment, and

  • the borrower has not been convicted of a real estate related fraud or felony in the last ten years.

The end goal of the HAMP-PRA program is to reduce the borrower's mortgage loan until the borrower's monthly payment is reduced to a monthly payment amount determined under the HAMP guidelines.