State officials have welcome holiday news for about 2,400 homeowners who are being threatened with foreclosure or who are behind in their mortgage payments.

The state Office of Consumer Protection has reached an agreement with Countrywide Financial Corp. and its parent company, Bank of America, designed to help subprime and adjustable-rate mortgage borrowers who bought homes with loans from Countrywide.

The deal may allow eligible Hawai'i owner occupants to modify terms of their Countrywide loans to escape foreclosure or make their mortgages more affordable.

Other distressed Countrywide borrowers who are being threatened with foreclosure of their subprime or pay-option adjustable-rate loans may have that process suspended until a determination can be made on their ability to to afford loan modifications.

"It's significant in the sense that one of the major lenders who was dealing with subprime mortgages in Hawai'i for several years has decided to modify some of these loans," said Steve Levins, Office of Consumer Protection executive director.

"We hope this will set a benchmark for some of the other lenders out there."

The agreement also may help stem Hawai'i's rising foreclosure rate, which as in the rest of the nation has edged higher because of the economic downturn, rising unemployment and a decline in housing prices.

While Hawai'i's foreclosure rate of 1 per 1,272 households in November is lower than the national average of 1 per 488, the number of foreclosures was double those in August, according to RealtyTrac data.

Countrywide was one of the largest sources in Hawai'i of so-called subprime mortgages, or those made to borrowers who are perceived to be at higher risk of default.

The agreement here follows others made nationally by Countrywide and Bank of America, which bought the mortgage lender earlier this year.

Countrywide announced the first of the agreements in October to settle claims made by 11 states that the company misrepresented loan terms, payment increases and borrowers' ability to afford loans.

"By taking projected foreclosure losses and instead directing those funds into these proactive foreclosure prevention efforts, we create a solution in the best interest of both our customers and the investors whose loans and securities we service," said Joe Price, Bank of America chief financial officer, in announcing the October settlements.

The Hawai'i agreement was reached recently and is effective immediately, Levins said.

He advised that Countrywide borrowers call the company to determine whether they are eligible for the program.

Levins said state officials are now encouraging other lenders to roll out similar programs for distressed mortgage borrowers.

The agreement also calls for: