The Florida Housing Finance Corp. has allocated $350 million to offer principal reductions to underwater borrowers in the state. The initiative is expected to help about 10,000 homeowners who are current on their payments but owe 125 percent more on their mortgage than what the property is worth. The state program will reduce the principal by up to $50,000 on participants' first mortgages. The money will come from the state's Hardest-Hit Fund for foreclosure prevention, in the form of a zero percent, deferred-payment loan that will be subordinate to existing mortgages on a particular property. The loan can be forgiven over a five-year period, at a rate of 20 percent a year.