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The White House released details Wednesday on the new mortgage relief program that President Obama announced in his State of the Union address. The new program aims to help more homeowners take advantage of historically low mortgage rates.

Under the proposed plan, which is officially known as the Blueprint for an America Built to Last, homeowners who are "underwater" with negative equity will be able to refinance so long as they are current on their mortgage payments and meet certain eligibility requirements. The administration estimates the proposal could save homeowners an average of $3,000 per year.

Expanding access to low mortgage rates

While this isn't the first time the White House has proposed a mortgage relief program, it is unique in that it will apply to all homeowners. The 2009 Making Home Affordable Program was also intended to help underwater homeowners refinance, but only servicers for loans owned or guaranteed by Fannie Mae or Freddie Mac were required to participate.

The new proposal would create a streamlined refinancing process that would be open to all homeowners. Borrowers with loans not owned or guaranteed by a federal program would be eligible to refinance so long as the following criteria is met:

• Borrowers must be current on their mortgage. They cannot have missed more than one payment in the six months prior to refinancing.
• Borrowers must have a credit score of at least 580.
• The loan size must meet FHA conforming loan limits for their geographic area. This limit varies based upon the median price of homes in the area.
• The loan must be for a single family, owner-occupied principal residence.

In addition to the refinancing plan for non-government backed mortgages, Obama's proposal would also create a streamlined refinancing process for those with loans owned or guaranteed by Freddie Mac and Fannie Mae.

Another component of the initiative would encourage homeowners to refinance for a shorter term and use their savings to pay down the loan principal and rebuild equity. Homeowners who agreed to do so could have their closing costs paid for by the government.

Paying for the plan

According to the White House, the refinancing plan will cost between $5 billion and $10 billion, depending on the final program details and the number of homeowners participating. However, this cost is expected to be absorbed by a fee to be imposed on financial institutions. The Financial Crisis Responsibility Fee would be assessed on large institutions based upon their size and the level of risk associated with their activities.

The White House proposal must first be passed by Congress before it can be implemented. Members of Congress rejected a previous attempt to impose fees on large banks, and some analysts expect the new refinancing program may be met with resistance as well.

The initial estimate released Friday for fourth-quarter Gross Domestic Product (GDP) hinted at something long missing from the US economy: positive momentum. But can it be sustained?

The Bureau of Economic Analysis estimate placed U.S. GDP growth at an annual, inflation-adjusted rate of 2.8 percent in the fourth quarter. If the estimate holds true, it would be the economy's best performance in a year and a half. But sustaining that momentum will depend on this growth translating into new jobs.

The ins and outs of GDP

The 2.8 percent estimate could mean that the economy has grown steadily in each of the last three calendar quarters. In the first three quarters of 2011, GDP posted growth numbers of 0.4 percent, 1.3 percent and 1.8 percent.

A 2.8 percent growth rate is not particularly strong, but the progression of numbers is certainly encouraging. Perhaps what is most impressive is that this growth represents the business and consumer sectors making progress against a headwind of government austerity.

The National Retail Federation predicted retail sales would increase 3.8 percent during the November-December holiday shopping period, compared with 2010, and First Data reported that use of credit cards was up 7 percent during that time.

Federal spending decreased by 7.3 percent in the fourth quarter, while state and local spending decreased by 2.6 percent. In other words, this is the opposite of fiscal stimulus, so there is nothing artificial about the improvement in growth.

Still, an important note of caution is that advance estimates of GDP growth tend to be subject to significant revision. At the end of February, and then again at the end of March, there will be more refined GDP releases, and these will tell whether the apparent growth is real.

GDP and interest rates

Savings account interest rates have a huge stake in the direction of economic growth. Federal Reserve policy has a direct effect on savings account rates, and the Fed has made it clear that it plans to favor extremely low interest rates until it is convinced that the economy is running at full steam.

Ironically, the encouraging GDP release came out just two days after a pessimistic Fed report signaled that it planned on maintaining its low interest rate policy at least until 2014. The Fed estimated that economic growth for 2012 would be limited to a range of 2.2 to 2.7 percent, so the fourth quarter number of 2.8 percent suggests that the economy may be a little ahead of schedule.

Does this mean that the Fed can lighten up on its low interest rate policy? Not yet. Growth will have to be a little stronger, and sustained a little longer, before the Fed will back off and raise rates -- and perhaps it will take even longer before that change in policy translates into higher savings account rates. Still, for an economy that has had a lot of false starts in recent years, the fourth quarter's growth was at least one step in the right direction.

After years of offering free debit cards, financial institutions are not likely to sell consumers on the idea of paying for the convenience of using them, according to a recent survey. The finding underlines the challenge that banks face in making up for the decline in revenue caused by financial regulations imposed last year.

The report from Javelin Strategy & Research, a financial industry analyst, found only 17 percent of consumer would continue to use their debit card if it came with any usage fees. The report also discovered that while plastic is a popular option, cash remains the most commonly used payment method.

How Americans pay for purchases

The Javelin report collected survey data from 3,200 consumers to evaluate how they paid for purchases as well as their attitudes toward various payment scenarios. Overall, respondents indicated cash was their most regularly used payment method with 79 percent reporting cash usage in the past seven days. Of those considered underbanked, 72 percent prefer cash to prepaid cards, credit cards or other payment methods.

While cash is popular, 73 percent of consumers surveyed say they are satisfied with their debit cards. However, that satisfaction doesn't translate into a willingness to pay for the convenience. Of the 83 percent who said they wouldn't use their debit card if it came with a usage fee, the following percentages said they would choose these alternatives:

• Pay with cash - 32 percent
• Pay with a credit card - 25 percent
• Switch to a bank that doesn't charge debit card fees - 26 percent

"Consumers love their debit cards, but the majority would choose different payment options if they were charged a fee for using debit," said Beth Robertson, Director of Payments Research at Javelin, in a press statement.

New regulations for swipe fees

The question of whether consumers would pay bank fees for debit cards isn't merely academic. Changes in federal regulations have left financial institutions facing a collective $12.2 billion decline in revenue. The decline was caused by new federal swipe-fee rules on debit cards that went into effect last October.

Prior to the implementation of the amendment, merchants bore much of the cost for debit card transactions. On average, retail businesses would pay 44 cents each time a debit card was swiped like a credit card. The Durbin Amendment limits the merchant transaction fees to 21 cents plus 0.05 percent of the sale total. Financial institutions with fraud-prevention standards in place can also charge merchants an additional cent.

The lowered merchant fees have meant a significant hit to the bottom line of banks. In response, some banks have floated the idea of charging consumers for their debit cards, but such proposals have been met with significant resistance. Bank of America found itself in a firestorm when it announced a $5 monthly fee for debit card use. After public outcry, the bank cancelled the planned fee.

With debit card fees highly unpopular, financial institutions will likely try to find another source to help pay the swipe fees, which means consumers should remain on the lookout for new bank fees on their checking accounts.

A rare bit of good news on oil prices emerged recently as oil and other energy costs declined for the third straight month in December, according to the latest figures from the Bureau of Labor Statistics (BLS). This development effectively put the brakes on inflation, which rose steadily during parts of 2011.

This cooling-down of inflation offered some immediate benefit to American consumers, and could be a factor in helping the fragile economic recovery gain some momentum.

Inflation takes a break

The BLS Consumer Price Index (CPI) was flat in both November and December, following a slight decline in October. This represents a fairly dramatic reversal of the trend in inflation: Prices had been rising at an increasing rate throughout 2011, bringing the year-over-year inflation rate to 3.9 percent by the end of September. The recent cool-down in the CPI brought the 2011 inflation rate to 3.0 percent -- still twice the rate of the year before, but now falling rather than rising.

Energy prices, which were a big part of the problem early in the year, have been the key to bringing inflation under control in recent months. The energy sector as a whole has now seen price declines for three straight months, with gasoline leading the way with the biggest price decreases. This helped offset increases in several other areas, including food and medical services.

Inflation versus interest rates

Here are four reasons the leveling off of inflation is worthy of notice -- and even applause:

1. It lets bank depositors gain back some lost ground. Although bank deposits are supposed to be safe, as long as inflation is rising faster than savings account interest rates, depositors are losing some of the value of their money. With inflation slightly negative over the last three months of 2011, bank customers had a chance to get ahead of inflation, even with the rates on CDs, savings, and money market accounts remaining below 1 percent. This doesn't just help those depositors, but it effectively makes more wealth available to fuel the economy.
2. It gives the housing market some breathing room. The housing market has shown signs of stabilizing lately, but this is largely dependent on record low mortgage rates. If inflation had continued to rise, it is unlikely that banks would have remained willing to make long-term loans at less than the rate of inflation.
3. It helps consumers deal with modest pay raises. Weekly earnings rose just 2.7 percent in 2011, less than the rate of inflation. Only a more moderate inflation rate will allow consumers get ahead with such anemic pay raises. In turn, giving consumers more room to spend is a key to making the economic recovery sustainable.

Month-to-month inflation numbers can be volatile though. Whether the improvements of the past three months can be sustained will be among the key economic factors of 2012.

A robust holiday shopping season apparently led some Americans to delay extra debt payments during December, but that didn't prevent the nation from ending on a high note. Despite a slowdown in debt payments at the end of 2011, all 50 states ended the year with less credit card debt than when the year began.

According to a recent report issued by CreditKarma.com, credit card debt declined 11 percent nationwide last year. However, it wasn't all good news. Credit scores saw a decline during that time as well.

Average credit card debt at $6,576

Overall, the news on debt was positive for 2011. According to the report, debt loads in four out of five categories remained steady or declined:

• Credit card debt declined 11 percent to an average of $6,576
• Student loan debt declined 9 percent to an average of $26,272
• Home equity debt declined 4 percent to an average of $47,905
• Home mortgage debt held steady at $173,876
• Auto loan debt increased 2 percent to $15,504

While consumers seemed to make strides in reducing their debt obligations, the holiday season seemed to curb payments. According to December data, only nine states saw their consumer debt reduced from the previous month. In addition, the decline was less than one percent in six of those nine states.

Of the states that saw an increase in credit card debt from November to December 2011, the jump was greatest in Delaware and Rhode Island. Those states saw a five percent increase in credit card debt bringing their averages to $7,423 and $6,388, respectively.

Credit scores drop in 2011

Credit card debt wasn't the only thing dropping in 2011. The report also found that credit scores were on the decline as well. Last year, the national average fell eight points to 660. California, Massachusetts and New Jersey were all tied as the states with the best consumer credit scores with an average of 679. The state with the lowest average score was West Virginia at 637.

A consumer's credit score is used by lenders to determine eligibility for loans and lines of credit. Those with lower scores are considered a higher risk and more likely to be charged higher credit card rates. They may also be denied credit or given less favorable lending terms.

Scores can range from 300-850, and factors such as total debt, type and age of credit accounts and late payments are used to determine an individual's rating. Age, race, occupation and salary are not considered. According to Experian, a credit reporting agency, credit scores greater than 700 generally indicate good credit management.