Principle Reduction LogoPrincipal Reduction with Recast Program or Lien Extinguishment

Program Overview

The Principal Reduction with Recast Program or Lien Extinguishment (PRRPLE) program will lower monthly mortgage payments to affordable levels for eligible homeowners by providing (i) a reduction in the principal balance of their first mortgage loan, combined with a loan recast or modification, or (ii) principal reduction which results in a full lien extinguishment.  The goal of the program is to reduce delinquencies and foreclosures by lowering mortgage payments to affordable levels for homeowners who have encountered a financial burden due to an eligible hardship.

In conjunction with the principal reduction described above, PRRPLE will also pay mortgage-related expenses (e.g., principal, interest, escrowed property taxes, homeowners insurance, and servicer-related fees) necessary to bring homeowners current on their mortgage.

The program is available statewide to targeted homeowners who are low to moderate income and meet THDA mortgage loan income limits.

 

Borrower Eligibility

In order to be eligible for assistance under PRRPLE, homeowners must meet the following criteria:

  • For a non-fixed income homeowner, maximum household income not to exceed $95,900.
  • For a fixed income homeowner, maximum household income not to exceed $68,700.
  • Homeowner must not have more than 12 months of principal, interest, taxes, and insurance (PITI) in savings or reserves.
  • Homeowner must have experienced one of the following eligible hardships after the purchase of their home.
    • Loss of income due to a death of a spouse
    • Loss of income due to a divorce
    • Loss of income due to under-employment (reduction of work hours or permanent disability)
  • The hardship must have occurred after January 1, 2010.
  • Homeowner must be employed or receiving a steady source of income.
  • Homeowner must be a U. S. citizen or a permanent resident alien.
  • Homeowner is required to complete a budgeting/housing counseling session before receiving assistance.

In order to receive principal reduction with a loan recast or modification, the following additional criteria apply:

  • Unpaid principal balance of first mortgage loan does not exceed $275,000.
  • Homeowner suffered a loss of income equal to or greater than 20% due to a divorce, death of a spouse, underemployment.
  • Pre-assistance monthly PITI exceeds 30% of household income.
  • Post-assistance monthly PITI does not exceed 38% of household income, and is not lower than 25% of household income.
  • For a non-fixed income homeowner, post-assistance loan-to-value (LTV) ratio is not less than 78%.
  • For a fixed income homeowner, there is no minimum LTV ratio.

In order to receive a full lien extinguishment, the following additional criteria apply:

  • Primary household income is from social security, long-term disability or other fixed income source.
  • Homeowner has a first mortgage loan with an unpaid principal balance that does not exceed $40,000.
  • Homeowner suffered a loss of income equal to or greater than 20% due to a divorce, death of a spouse, underemployment.
  • Pre-assistance monthly PITI exceeds 30% of household income.

Eligibility for program assistance will be determined by THDA in its sole discretion, based on the criteria stated above and as otherwise set forth in the program guidelines.  Funds will be allocated on a first-come/approved, first-served basis.

 

Program Exclusions

  • Manufactured homes not considered real property.
  • Homeowners who have previously received HHF funds through the HHFP program.
  • Homeowners who are in an “active” bankruptcy.
  • Homeowners with a subordinate lien that is delinquent or in foreclosure status.

 

Assistance Type

THDA has structured the program as a 0% interest, non-recourse, deferred-payment, forgivable, subordinate mortgage loan with a ten (10) year term. The loan amount will be up to $40,000 and forgiven 20% per year in years 6 through 10.  At the end of the tenth year, the note will be considered satisfied and THDA will, upon request, release the lien securing the note.  The PRRPLE loan funds are due on sale, refinance, or if the property is no longer owner-occupied.

 

For general program questions please contact:  SFSPAsk@thda.org.