(Bank of America loan modification details added to this update.)CHARLOTTE, N.C. ( TheStreet) -- Bank of America ( BAC) is taking a dramatic step toward righting its most troubled mortgages, with plans to forgive up to 30% of loan principal in some cases. Bank of America, the country's biggest home lender, announced a plan on Wednesday to begin examining principal forgiveness ahead of rate reduction when modifying its "most severely underwater" loans. Subprime, pay-option and prime two-year hybrid mortgages will be eligible for its newly formulated program if they are at least 60 days delinquent. The move is likely to lead to writedowns but also help the most struggling homeowners who don't qualify for help through a federal workout plan. Bank of America's plan will target borrowers who owe more than 120% of what their homes are worth, and offer interest-free forgiveness on loan payments, as long as they stay current. It expects to implement the plan in May and extend its overall workout program for six additional months, through Dec. 31, 2012.