by Susan Lavery

The Florida Housing Finance Corp. announced that it will use $350 million in federal funding to pay down loan amounts for underwater borrowers. The program, opens 9 a.m. Wednesday on a first-come, first-served basis and is expected to help 10,000 homeowners initially. It will then be reevaluated for possible expansion.

Principal reduction, while controversial, is considered by many homeowner advocates as the most effective way to keep people from defaulting on their loans. Money used for the new program is coming from the $1 billion Florida received in Hardest Hit Fund money.

To be eligible for the principal reduction money, borrowers must be current on their mortgage payments. They must also be Florida residents and U.S. citizens, live in their home as their primary residence, and owe 25 percent or more on their mortgage than their home is valued. Unlike previous Hardest Hit plans, homeowners do not have to prove a financial hardship to receive the principal reduction money.

For more information and instructions on how to apply, go to:

Not all mortgage servicers are participating in the program, although the biggest lenders, including Bank of America, Wells Fargo and JPMorgan Chase have agreed to accept the Hardest Hit money. A list of servicers not participating can be found on the principal reduction website.