President Barack Obama says he will press Congress to approve a national home mortgage refinance plan that would prod banks to give millions of homeowners new low-interest mortgages.
“I’m sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates,” he said at Tuesday’s State of the Union address.
“No more red tape. No more runaround from the banks,” he said.
The program will save homeowners roughly $3,000 per year, according to the speech.
Rumors of the proposal have floated through D.C. in the last few weeks, but administration officials kept the plan secret until Tuesday’s speech.
If a million homeowners were to use the process, then the banks would lose $3 billion in annual revenue. That lost banking revenue could hit the banks hard, stymie lending to businesses, and cause economic problems in New York.
Banks will be allowed to charge a small fee per house, and the lower monthly payments will lower the level of distrust between people and the banks, Obama will argue.
“A small fee on the largest financial institutions will ensure that it won’t add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust,” Obama explained. (RELATED: Full State of the Union coverage)
Obama’s speech says the current economic crisis was caused, in part, by the banks.
“In 2008, the house of cards collapsed. We learned that mortgages had been sold to people who couldn’t afford or understand them,” he will say. “Banks had made huge bets and bonuses with other people’s money. … It plunged our economy into a crisis that put millions out of work, saddled us with more debt, and left innocent, hard-working Americans holding the bag.”