An estimated 2,400 or more Hawaii residents who took out subprime or pay-option mortgage loans with Countrywide Financial Corp. during the last real estate boom and are now facing foreclosure could see some relief as a result of an agreement reached between the lender and the state of Hawaii.

The agreement with Hawaii resulted from a lawsuit against Countrywide that was initiated in June by several states including California, Illinois and Florida, said Stephen Levins, executive director of the Hawaii Office of Consumer Protection.

“;Several states including Hawaii were looking into the lending practices of Countrywide,”; Levins said.

While Hawaii was not a plaintiff in the lawsuit, the state was a beneficiary in a nationwide modification, Levins said.

Bank of America, which acquired Countrywide on July 1, has said that the agreement could include up to $8.4 billion in interest rate and principal reductions for nearly 400,000 Countrywide customers nationwide.

The company said that the program was developed together with state attorneys general and is designed to achieve affordable and sustainable mortgage payments for borrowers who financed their homes with subprime loans or pay-option adjustable-rate mortgages serviced by Countrywide and originated prior to Dec. 31, 2007.

“;We believe that this settlement will provide needed relief to Hawaii homeowners in financial distress and hope that eligible borrowers will contact Countrywide as soon as possible,”; Levins said.

Some of the options Countrywide/Bank of America may use to provide loan relief include automatic freeze or reduction in interest rates, conversion to fixed-term loans, and refinancing or reduction of principal owed. Some homeowners also may be eligible to obtain late fee and prepayment penalty waivers. Countrywide also has agreed to make compensatory payments to some borrowers who have already lost their homes.

“;We are confident that together with the attorneys general we have developed a comprehensive program that provides more solutions than ever before to assist troubled borrowers and put them back on the path to sustained homeownership,”; Barbara Desoer, president of Bank of America's mortgage, home equity and insurance services, said in a press release.

Countrywide mortgage servicing personnel began contacting eligible homeowners this month, Desoer said.

“;Combined with our strong track record in responsible lending and previously announced lending practices commitments, this bold new program makes it clear that Bank of America is committed to be the leader in responsible mortgage lending practices,”; she said.

In addition to providing loan modification and homeowner relief, Bank of America/Countrywide also has agreed to stop offering pay option ARMs and significantly curtail offering “;low-documentation”; and “;no-documentation”; loans. As part of the settlement, the company also must initiate an early identification and contact program for borrowers who have trouble making their payments, and continue working with nonprofits, federal agencies, and state regulators on ways to use REO (real estate owned) and other properties for community development.

While Countrywide is supposed to contact eligible Hawaii homeowners, Levins urged any homeowners who believes they might fit the criteria to contact the company for immediate relief. Homeowners who contact Countrywide and believe that they have been unfairly denied participation in the program are encouraged to contact the Office of Consumer Protection at 587-3222 for follow-up, he said.

While the agreement with Countrywide will do a lot of good in Hawaii, it's only a start, Levins said.

“;It's not a panacea for everyone,”; he said. “;It may be too late for some people, but under the circumstances we felt that it was the best thing to do at this time.”;

The program is good news for Hawaii's mortgage industry, said Rusty Rasmussen, a mortgage broker with Castle & Cooke Mortgage.

“;Countrywide was one of the larger lenders servicing loans in Hawaii and, if they are willing to work with people having difficulty, that's good news for everyone,”; Rasmussen said.

Rasmussen urged other troubled Hawaii homeowners, outside of Countrywide customers, to contact their lenders for assistance.

  “;Most of the local lenders have been very willing to assist their customers,”; Rasmussen said.

In addition, Rasmussen said that mortgage brokers have more latitude to help clients as a result of lowered interest rates and FHA loans, which can service customers who have less than perfect credit or low equity in their homes.

“;Typically, it takes a credit score of 720 to get a conventional mortgage now, but we can get people into an FHA loan with scores as low as 620,”; he said.