His refinancing plan would provide homeowners the opportunity to save about $3,000 a year on their home loans, Obama said Tuesday during his State of the Union address before a joint session of Congress.
The plan would be paid for by a "small fee on the largest financial institutions" so it wouldn't add to the deficit and would "give banks that were rescued by taxpayers a chance to repay a deficit of trust."
Americans who play by the rules expect government and financial institutions to do so as well, Obama said.
"It's time to apply the same rules from top to bottom: No bailouts, no handouts, and no cop-outs," he said. "An America built to last insists on responsibility from everybody."
The country needs "smart regulations" to prevent irresponsible behavior by lenders, Obama said.
"Rules to prevent financial fraud, or toxic dumping, or faulty medical devices, don't destroy the free market," Obama said. "They make the free market work better."
"So much of America needs to be rebuilt," he said, citing crumbling roads and bridges, an energy-hog power grid and an incomplete high-speed broadband network.
Turning to construction, Obama said he will sign an executive order soon that will "clear away the red tape" that bogs down too many projects.
Congress needs to fund construction projects, he said.
"Take the money we're no longer spending at war, use half of it to pay down our debt, and use the rest to do some nation-building right here at home," he said.