The Obama Administration is considering a plan that would allow homeowners with government-backed mortgages to refinance their homes at today’s (low low) interest rates — a move that could save Americans $85 billion and even reduce the federal deficit.

Many homeowners who would like to refinance cannot because they’re underwater or don’t have the kind of high credit rating lenders are looking for these days.

The details of such a plan haven’t been decided (e.g., can you participate if you’re delinquent?), but the general idea is appealing because it wouldn’t need to use any of the $45.6 billion in Troubled Asset Relief Program (TARP) funds, and that money could instead be put toward reducing the deficit.

Christopher Mayer, an economist at the Columbia Business School, told The New York Times that this kind of plan was “low-hanging fruit.”

“This is the best stimulus out there because it doesn’t increase the deficit, it accomplishes monetary policy, and it reduces defaults in housing,” he said.

Even better, the plan might not require Congressional approval, so it could actually happen.

Click here to read the full story in The New York Times.