The State of Virginia has joined a nationwide settlement agreement with Countrywide that spells good news for the state’s distressed homeowners. In total, the settlement will provide more than $8 billion in loan modifications and foreclosure relief to as many as 397,000 homeowners across the United States, including projected relief of $210 million for nearly 9,000 homeowners in Virginia. (Countrywide was acquired by Bank of America Corporation in July 2008.)

Under terms of the settlement, Countrywide and its affiliates have agreed to offer loan modifications for eligible borrowers, allowing hundreds of thousands of Americans to keep their homes. According to the settlement agreement, 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 Dec. 31, 2007, and who meet other specific requirements.

Depending on the type of loan, Countrywide’s 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 company’s proposed loan modifications, first-year payments of principal, interest, taxes and insurance will be targeted to equal 34 percent of the borrower’s income.

In addition, as part of the settlement, Countrywide has agreed 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 will also 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.

On December 1, 2008, Countrywide began sending mailings to eligible Countrywide borrowers notifying them of the loan modifications that may be available under the terms of the settlement. Countrywide customers who have questions about their eligibility for a loan modification are encouraged to call Countrywide toll-free at 1-800-669-6607.

Ralph R. Roberts, GRI, CRS Award-Winning REALTOR® and Author Loan Modification For Dummies (avail. Summer 2009)