California’s attorney general today announced a multibillion-dollar settlement over alleged unfair and deceptive lending practices by Countrywide Financial Corp. — the company was acquired by Bank of America earlier this year.

The settlement is expected to allow hundreds of thousands of eligible borrowers to obtain more affordable loans and avoid foreclosure.

"The Countrywide settlement will likely become the largest predatory lending settlement in history, dwarfing the nationwide $484 million settlement with Household Finance Corp. in 2002, under which California received approximately $91 million," according to a statement today by the office of California Attorney General Jerry Brown .

The settlement, with Countrywide Home Loans, Countrywide Financial Corp. and Full Spectrum Lending, is expected to provide up to $8.68 billion worth of relief, including $3.5 billion to California borrowers.

California was among a group of several states that had filed lawsuits against Countrywide. Attorneys general in Arizona, Connecticut, Florida, Illinois, Iowa, Michigan, North Carolina, Ohio, Texas and Washington are also participating in the settlement. Attorneys general in California and Illinois reportedly led the negotiations for the group of states.

Bank of America referred to the settlement agreement in a statement as a "proactive home retention program that will systematically modify troubled mortgages with up to $8.4 billion in interest rate and principal reductions for nearly 400,000 Countrywide Financial Corp. customers nationwide."

The program is intended to benefit those borrowers who "financed their homes with subprime loans or pay-option adjustable-rate mortgages serviced by Countrywide and originated prior to Dec. 31, 2007," the company announced. Bank of America acquired Countrywide on July 1, 2008.

The settlement specifically covers subprime and pay-option adjustable-rate mortgage loans for which the borrower’s initial payment was due between Jan. 1, 2004, and Dec. 31, 2007, according to the California announcement, and the program is available for loans in default that are secured by owner-occupied property and serviced by Countrywide Financial or an affiliate. The loan balance must be 75 percent or more of the current value of the home, and the borrower must be able to afford adjusted monthly payments under the modification terms, the announcement states.

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