Attorney General Bob McDonnell announced Monday that Virginia has joined a nationwide settlement agreement with Countrywide Financial Corporation. The settlement will provide about $8.4 billion in home loan and foreclosure relief to as many as 397,000 homeowners across the country, including projected relief of $212.8 million for more than 8,900 homeowners in Virginia.

Countrywide was acquired by Bank of America Corporation in July 2008. In addition, McDonnell announced that he will propose legislation in the General Assembly to provide further assistance to Virginia homeowners during this tough economic period.

“This settlement will provide crucial financial relief to thousands of Virginians who are struggling each month to pay their mortgages and keep their homes,” says McDonnell. “I hope this settlement will serve as a model for other mortgage lenders to follow as they develop plans to help homeowners facing foreclosure.”

Under the settlement, Countrywide and its affiliates agree to modify loans for eligible borrowers so they are better able to keep their homes. Borrowers eligible for loan modifications are those who received either a qualifying sub-prime adjustable rate mortgage or a Pay Option adjustable rate mortgage prior to December 31, 2007 and who meet other specific requirements.

Depending on the type of loan, modifications may include an automatic freeze or reduction in interest rates, conversion to fixed-rate loans, or refinancing or reduction of the principal owed. Under the modifications, first-year payments of principal, interest, taxes and insurance will be targeted to equal 34 percent of the borrower’s income.

In addition, Countrywide agrees to pay a total of $150 million nationwide under a Foreclosure Relief Payment program for particular borrowers who either already have lost their homes or are at least 120 days delinquent. Virginia’s share of this amount is approximately $2.5 million.

Countrywide also agrees to pay up to $70 million nationwide for relocation assistance to borrowers who do not qualify for a loan modification and who subsequently face foreclosure. Virginia’s projected portion of these payments is estimated at $2.3 million.

Finally, Countrywide agrees to waive prepayment penalties, late/delinquency fees and default fees otherwise due from eligible borrowers. Virginia’s estimated total of these waivers is $3.3 million.

On December 1, Countrywide began sending mailings to eligible Countrywide borrowers notifying them of the modifications that may be available under the terms of the program. Countrywide customers who have questions about their eligibility for a loan modification are encouraged to call Countrywide toll-free at 1-800-669-6607 or visit the company’s website.

The settlement resolves any potential consumer protection claims McDonnell could have filed alleging deceptive practices arising out of the mortgage origination or servicing activities of Countrywide in Virginia.

In addition to announcing this settlement, McDonnell also released details of legislation he will propose in the General Assembly to further help Virginia homeowners:

Virginia Mortgage Foreclosure Prevention Legislative Proposal

This proposal seeks to amend recently adopted provisions within the Virginia Consumer Protection Act law that, among other things, prohibit mortgage foreclosure prevention operators from being paid a fee prior to the settlement on the sale of residential real property.

Questions have been raised concerning whether the prohibitions currently in place apply to foreclosure prevention transactions that do not involve the sale or transfer of residential real property (e.g., mortgage modification assistance).

To make clear that this law covers all foreclosure prevention transactions, this bill proposes to add language to prohibit mortgage foreclosure prevention operators from charging or receiving any fees prior to full and complete performance of the services they agreed to perform, if the transaction does not involve the sale or transfer of residential real property.

Virginia Consumer Protection Act and Mortgage Lender and Broker Act Legislative Proposal

Currently, mortgage lenders are excluded from the Virginia Consumer Protection Act, while mortgage brokers are not. To eliminate this inconsistency, this proposal seeks to remove the “mortgage lender exclusion” from the VCPA and make the conduct of mortgage lenders subject to the VCPA. (The VCPA generally prohibits misrepresentation and other deceptive practices in consumer transactions.)

In addition, this proposal also seeks to amend the Virginia Mortgage Lender and Broker Act to clarify the application of code sections related to Attorney General Enforcement and individual rights of action under the MLBA.

All Virginians who are facing foreclosure may obtain counseling help by calling the Homeownership Preservation Foundation’s HOPE Hotline toll-free at 1-888-995-HOPE.