Bank of America struck a deal with regulators that might help the economy. It’s the boldest step by any bank to address the ongoing foreclosure crisis.

Facing a lawsuit over deceptive mortgage practices, a Bank of America subsidiary will modify tens of thousands of loans to help keep people in 11 states from losing their homes. Borrowers stuck with Countrywide Financial mortgages that they can’t afford could see their interest rates reduced or have the loan principal cut.  Bank of America purchased Countrywide in June, at the same time Illinois and California sued Countrywide.

Bank of America agreed to provide up to $8.4 billion in interest rate and principal reductions to around 400,000 people in trouble of losing their homes.

A plan announced today by Bank of America will be the most aggressive foreclosure prevention effort ever undertaken by a U.S. bank.

The program, scheduled to start in December, will be open to distressed borrowers who signed up with Countrywide Financial between January 1, 2004 and December 31, 2007.