One of the biggest problems in the U.S. economy, to say nothing of Las Vegas’ and its surrounding municipalities is underwater mortgage debt. People who have too much will save money rather than spend it in the local economy. The result is that other people lose their jobs even if they took on no debt at all.
One program the federal government created to alleviate the underwater mortgage crisis is the Principal Reduction Alternative (PRA), which is part of the Making Home Affordable program that’s administered by the Department of the Treasury and the Department of Housing and Urban Development. Principal reduction is an attractive alternative to refinancing or mortgage modification because it unilaterally reduces the amounts debtors have to pay, which makes it easier for them to stay in their homes and start building up equity again. Here are some things worth knowing about eligibility for PRA:
- Only homeowners whose mortgages are not owed to Fannie Mae or Freddie Mac can qualify for PRA. Those whose lenders are government-sponsored enterprises should look into the options their lenders provide.
- The underwater mortgage must be attached to your primary residence. This means it won’t apply to any second homes or rental properties that are underwater.
- Your mortgage must have been issued before January 1, 2009. This requirement shouldn’t be too hard for most underwater mortgagors to meet.
- You must owe no more than $729,750 on your first mortgage. PRA is obviously not designed to benefit high-income Americans.
- Homeowners must also be able to demonstrate an income necessary to support payments.
- Your monthly mortgage payment must be greater than 31 percent of your gross monthly income. Fortunately, “gross income” here is pretax income, i.e. before payroll tax is deducted, which is a benefit to homeowners. However, this requirement is probably going to create a lot of problems for the program overall. People who are underwater on their primary residence’s mortgages often live in job-scarce locales, making it likely they have no income and would be better off finding ways to sell the residence.
- Similarly, you must also have a documented financial hardship and are either delinquent or are about to fall behind on your mortgage.
- Finally, homeowners must not have been convicted of a felony related to a mortgage or real estate transaction.
The PRA might be helpful to some Las Vegas homeowners, but its requirements limit its benefits to so few homeowners that other options might be more worthwhile, such as short-selling the home or filing bankruptcy. Regardless, talking to a Las Vegas bankruptcy lawyer will help you better understand your options.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-880-5554 to set up your free consultation.