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Jan. 25 (Bloomberg) — President Barack Obama answered Ben S. Bernanke’s appeal for more action to fix the U.S. housing market that’s restraining the economic recovery by proposing a plan to help borrowers reduce their monthly mortgage payments.

Obama is sending Congress legislation that would allow homeowners to tap record-low borrowing costs, potentially boosting housing as he seeks re-election this year. The proposal could save participants about $ 3,000 a year, Obama said in his State of the Union speech to Congress.

Even with unemployment at the lowest level since February 2009 and housing sales increasing, homeowners have been blocked from refinancing by house prices that are 32 percent below their 2006 peak and tightened bank lending. While parts of the plan may face opposition in a divided Congress, and it’s important to see details, the approach is “a big step forward,” said Christopher Mayer, a Columbia Business School professor.

“It’s going to help homeowners who are struggling and it’s likely to be a first step to really opening up the market to more normal credit standards,” said Mayer, who along with fellow Columbia professor Glenn Hubbard first proposed a mass refinancing program in 2008.

The proposal follows Federal Reserve Chairman Bernanke’s call for lawmakers and t…………… continues on BusinessWeek