A new national refinancing program unveiled by President Obama earlier in the week will rely on the Federal Housing Administration (FHA) to refinance private and GSE mortgages, according to a report from Federal Financial Analytics in Washington.

The new FHA program would provide a "streamlined, unlimited high LTV refi option" for borrowers, FFA analysts wrote.

To get it off the ground, Congress must remove the 97% loan-to-value cap on FHA loans and approve a tax on banks to cover losses to the FHA mortgage insurance fund.

To date no other details or parameters of the effort have been released.

If the plan gets off the ground it will come at a precarious time for FHA: the government's mortgage insurance fund has a low capital position and some private economists believe eventually the Treasury Department will need to bailout the MI fund.

Keefe, Bruyette & Woods (KBW) analyst Brian Gardner called the bank tax idea a "poison pill" that will kill any chance of Congressional passage. “Furthermore, we think the White House knows the chances of this plan passing Congress is low," Gardner said.

The announcement of this new refinancing plan has irked some lenders that are frustrated by the slow start of the HARP 2.0 program.

An FHA Refinance plan was not discussed during the summer, when HARP 2.0 was under discussion. "If this new refi program is so important why wasn't it announced last October?" asked American Bankers Association senior vice president Bob Davis.

"We have numerous banks that are frustrated because their customers want to refinance [through HARP 2.0]," Davis told ASR sister publication National Mortgage News. But the loans have to be manually underwritten and most banks are heavily reliant on automated approval systems.

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